CA Sanya Kapoor
Quick Summary
ICAI issued Guidance Note on May 10th, 2020 on Key Considerations for Auditor amid COVID-19. Key takeaways are as follows: Background Section 134(5) of the Companies Act, 2013 requires board of directors of every company to state in its Directors Responsibility Statement that they have prepare
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FAQ :
The ICAI issued a Guidance Note on May 10th, 2020, detailing key considerations for auditors when evaluating a company's going concern status amidst the COVID-19 pandemic and its inherent uncertainties.
Auditors should consider the impact of current events on operations and cash flows, the effects of COVID-19 on assumptions, and specific matters like regulatory changes, operating environment shifts, and liquidity risks.
Management must consider the going concern assumption for at least 12 months from the end of the reporting period.
Mitigating factors include reductions in capital expenditure, dividends, and bonuses, deferral of payments, working capital reduction, taxation payment holidays, and government funding.
If the going concern basis is inappropriate and not adequately disclosed, the auditor may issue a qualified or adverse opinion. If it's inappropriate but a material uncertainty exists and is disclosed, an unmodified opinion with a 'material uncertainty related to going concern' section is issued.
Additional procedures include analysing cash flow forecasts, interim financial statements, loan agreements, inquiring with legal counsel about litigation, confirming financial support arrangements, evaluating plans for unfilled orders, and assessing borrowing facilities.
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