Document ID: chunk:federal_register_of_legislation:F2023C00340:reg:10:p11
Version: federal_register_of_legislation:F2023C00340
Segment Type: reg
Provision Reference: reg 10 (pt 11/29)
Character Range: 35421–38527

concern is a key part of the auditor's consideration of management's use of the going concern basis of accounting.

    A9.             It is not the auditor's responsibility to rectify the lack of analysis by management.  In some circumstances, however, the lack of detailed analysis by management to support its assessment may not prevent the auditor from concluding whether management's use of the going concern basis of accounting is appropriate in the circumstances.  For example, when there is a history of profitable operations and a ready access to financial resources, management may make its assessment without detailed analysis.  In this case, the auditor's evaluation of the appropriateness of management's assessment may be made without performing detailed evaluation procedures if the auditor's other audit procedures are sufficient to enable the auditor to conclude whether management's use of the going concern basis of accounting in the preparation of the financial report is appropriate in the circumstances.

    A10.         In other circumstances, evaluating management's assessment of the entity's ability to continue as a going concern, as required by paragraph 12, may include an evaluation of the process management followed to make its assessment, the assumptions on which the assessment is based and management's plans for future action and whether management's plans are feasible in the circumstances.

The Period of Management's Assessment (Ref: Para. Aus 13.1–Aus A13.2)

    A11.         Most financial reporting frameworks requiring an explicit management assessment specify the period for which management is required to take into account all available information.[12]

Considerations Specific to Smaller Entities (Ref: Para. 12–Aus 13.2)

    A12.         In many cases, the management of smaller entities may not have prepared a detailed assessment of the entity's ability to continue as a going concern, but instead may rely on in‑depth knowledge of the business and anticipated future prospects.  Nevertheless, in accordance with the requirements, the auditor needs to evaluate management's assessment of the entity's ability to continue as a going concern.  For smaller entities, it may be appropriate to discuss the medium and long‑term financing of the entity with management, provided that management's contentions can be corroborated by sufficient documentary evidence and are not inconsistent with the auditor's understanding of the entity.  Therefore, the requirement in paragraph Aus 13.1 for the auditor to request management to extend its assessment may, for example, be satisfied by discussion, enquiry and inspection of supporting documentation, for example, orders received for future supply, evaluated as to their feasibility or otherwise substantiated.

    A13.         Continued support by owner‑managers is often important to smaller entities' ability to continue as a going concern.  Where a small entity is largely financed by a loan from the owner‑manager, it may be important that these funds are not withdrawn.  For example, the continuance of a