Page 122 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

(CNO-SA560.120) Facts Which Become Known To The Auditor After The Financial Statements Have
Been Issued.
All the steps / points in this area are similar to previous concept, there are few notable change given below
If management decides to amend FST and Auditor gives new Audit Report
• Management should inform everyone who receive old FST and AR not to rely on it and wait for new set.
o In new AR, Auditor should put EMP / OMP, explaining revision of FST and Referring to para in notes to
accounts, which explain detail. reason for revision
• If management does not take appropriate step to inform people receiving old FST to discard it, Auditor
should inform TCWG.
• If TCWG does not take necessary steps, Auditor should take steps to prevent reliance on old AR. (public
notice or speak at AGM)

SA 570

GOING CONCERN

(CNO-SA570.020) Step 1: - Events Or Conditions Creating Significant Doubt Over Going Concern?
Doubt: Events or conditions may cast significant doubt about the going concern assumption.
Examples: The following are examples that may create this doubt.
Non-Exhaustive: The listing is not all-inclusive.
Uncertainty: The existence of one or more items does not always signify that a material uncertainty exists.
Financial
In sequence of falling business:
• Substantial operating losses or deterioration in value of assets used to generate cash flow
• Negative operating cash flow
• Arrears or discontinuance of dividends
• Negative liability or net current liability position
• Adverse key financial ratios
Borrowings related points:
• Inability to comply terms of loan & agreements (Maintaining Stock Levels, Margin Money)
• Fixed term borrowing approaching maturity without realistic prospects of renewal or repayment
• Excessive reliance on STB (Short term borrowing) to finance long term assets (Kingfisher Airlines)
• Inability to obtain financing for essential new product development or other essential investments (Satyam,
Banks refused to give new loans)
Creditors related points:
• Inability to pay creditors on due dates.
• Indications of withdrawal of financial support by creditors (No extension from creditors)
• Changing terms from credit to cash
Operating
Management:
• Management intends to liquidate the entity or cease operations.
• Loss of key management without replacement
Employee- Labour difficulties
Raw Material- Shortage of important supplies, loss of principal supplier's
Production - Serious breakdown
Sales:

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