Your auditor is required to review your ‘going concern assessment’. In assessing whether the going concern assumption is appropriate, the firm’s management must take into account all the available information about the foreseeable future, which is at least, but is not limited to, twelve months from the date when the financial statements are authorised for issue.
IFPR will then feed into this assessment: for example, increases in capital requirements will have to be anticipated and cash flow forecasts and budgets prepared to show how you will maintain sufficient capital in the firm. In addition, you will need to consider the longer-term impact (if any) of other factors including COVID-19 and Brexit.
Ideally, your forecast should consider the ‘base case’ and the sensitivity of the base case to movements in the key assumptions such as variations in revenue or expenses, considering plausible ‘best case’ and ‘realistic worst case’ scenarios.
Although there is no written requirement for you to prepare a formal going concern document for your audit, the auditing standard on going concern (ISA (UK) 570 (Revised September 2019) Going Concern), states “Where management has not yet performed an assessment of the entity's ability to continue as a going concern, the auditor shall request management to make its assessment”. We therefore recommend that you document your assessment prior to your audit commencing.
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