• 1 Marks

AAA – L3 – SA – Q1.8 – Going Concern Audit

Incorrect statement about going concern audit.

Which of the following is NOT true about audit of the appropriateness of management’s use of the going concern basis of accounting?

A   The auditor must assess the appropriateness of the going concern basis of accounting.

B   Auditing the cash flow forecast is a good source of audit evidence.

C   Written representations are usually sufficient on their own.

D   If there a material uncertainty exists with regards to going concern, an unmodified audit opinion is possible if a Material     Uncertainty Related to Going Concern paragraph is included.

C

Explanation:
The auditor must carry out their own audit procedures to gain audit evidence about going concern and cannot solely rely on written representations, making C incorrect. Statement A is true, as the auditor must assess the going concern basis. Statement B is true, as cash flow forecasts provide audit evidence. Statement D is true, as an unmodified opinion with a Material Uncertainty paragraph is possible. Thus, C is the correct answer.

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