Sa 570 (going concern)

311 views 6 replies

Abhishek

ca final

215 Points Joined August 2013

hello i have a doubt.. if auditor feels going concern assumption is not right, then he will give adverse opinion irrespective of disclosure of the same.. right???
but in question- 121(milk butter, peanut butter) of Pankaj gargs scanner, its written that the auditor should tell the management to give proper disclosure....why it isnt written that auditor should give adverse opinion...as per the rules, disclosure is irrelevant in this case because going concern assumption itself is inappropriate...

Replies (6)

CA Raj Doshi

Practising CA

8944 Points Joined December 2013

If the financials are prepared on net realisable values along with disclosure about the entity no more being a going concern, then auditor will give an unmodified opinion... adverse opinion will come only when management prepares financials as per goin concern assumption which auditor feels inappropriate.

Abhishek

ca final

215 Points Joined August 2013

Thanks for your reply... can you clarify isnt preparing the financial statements on realisable basis same as preparing it on the going concern basis..

CA Raj Doshi

Practising CA

8944 Points Joined December 2013

No. Financials are not prepared on realisable basis. example.. fixed assets are carried at historical costs whereas the realisable value would be higher or lower. e.g land,motor car.

Abhishek

ca final

215 Points Joined August 2013

Thanks sir.. I meant to say---
if the fs are prepared on going concern basis, then as far as what i have been told (unless i am mistaken) , assets are shown at realisable value and liabilities on the value at which they are expected to be discharged.. please correct me if I am wrong!!

CA Raj Doshi

Practising CA

8944 Points Joined December 2013

Yes. I already corrected you once. Is the land valued in balance sheet at its realisable value or historical cost ? Cost may be 1 lakh but current realisable value is 1 crore. You are confused about the terminology.