ISA 570 Going concern MCQs

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Going concern is the assumption that the entity will continue in business for the foreseeable future. Here on MCQs.club we have prepared easy Multiple
ISA 570 Going concern MCQs

ISA 570, Going concern

Going concern is the assumption that the entity will continue in business for the foreseeable future. Here on MCQs.club we have prepared easy Multiple-Choice Questions (MCQs) on ISA 570, Going concern revised IFAC that fully cover the ISA 570 summary and definition, ISA 570 MCQs with answers, these MCQs are a basis of conclusions. These MCQ on SA 570 are helpful for Competitive exams, Professional Accountancy exams and Business management exams.

  1. Going concern – is the assumption that the entity will continue in business for the foreseeable future.
    1. True
    2. False
  1. Consideration of the foreseeable future involves making a judgment about future events, which are inherently uncertain.
    1. True
    2. False
  1. Financial statements are prepared on the basis that the reporting entity is a going concern. An entity shall prepare financial statements on a going concern basis, unless management:
    1. either intends to liquidate the entity or to cease trading
    2. has no realistic alternative but to do so.
    3. Both A or B
    4. None
  1. Where the assumption is made that the company will cease trading, the financial statements are prepared using:
    1. the break-up basis
    2. liquidation basis
    3. Both A&B
    4. None
  1. Under the break-up or liquidation basis:
    1. The basis of preparation and the reason why the entity is not regarded as a going concern are disclosed.
    2. Assets are recorded at likely sale values.
    3. Inventory and receivables may need to be written down as inventory may be sold for a lower price or may be scrapped, and receivables may not pay if they know the company is ceasing to trade.
    4. All of the above
  1. Which of the following is correct regarding Director’s responsibilities in respect of going concern?
    1. To assess the company’s ability to continue as a going concern when they are preparing the financial statements.
    2. Directors should prepare forecasts to help assess whether they are likely to be able to continue trading for the next 12 months as a minimum.
    3. Both A&B
    4. None
  1. When the directors are performing their assessment, they should take into account a number of relevant factors such as:
    1. Current and expected profitability
    2. Debt repayment
    3. Sources (and potential sources) of financing.
    4. All of the above

  1. ISA 570 Going Concern [para 9] states that the auditor shall:
    1. Obtain sufficient appropriate evidence regarding the appropriateness of management’s use of the going concern basis of accounting in the preparation of the financial statements.
    2. Conclude on whether a material uncertainty exists about the entity’s ability to continue as a going concern.
    3. Report in accordance with ISA 570.
    4. All of the above
  1. Identify Typical indicators of going concern problems:
    1. Inability to meet debts as they fall due.
    2. Significant lack of working capital.
    3. Inability or insufficient funds to keep up with changes in technology resulting in loss of custom and obsolescence of inventory.
    4. All of the above
  1. Audit procedures to assess management’s evaluation of going concern include:
    1. Evaluate management’s assessment of going concern.
    2. Assess the same period that management have used in their assessment and if this is less than 12 months, ask management to extend their assessment.
    3. Consider whether management’s assessment includes all relevant information.
    4. All of the above
  1. Audit procedures to perform where there is doubt over going concern include:
    1. Analyse and discuss the entity’s latest available interim financial statements.
    2. Read minutes of the meetings of shareholders, the board of directors and important committees for reference to financing difficulties.
    3. Review events after the year-end to identify those that either mitigate or otherwise affect the entity’s ability to continue as a going concern.
    4. Obtain written representations from management regarding its plans for the future and how it plans to address the going concern issues.
    5. All of the above
  1. Disclosures relating to going concern are required to be made by the directors in circumstances such as:
    1. Where there is any material uncertainty over the future of a company
    2. Where the directors have been unable to assess going concern in the usual way (e.g. for less than one year beyond the date on which they sign the financial statements).
    3. Where the financial statements are prepared on a basis other than the going concern basis, the basis used should be disclosed.
    4. All of the above
  1. Which of the following statement is correct?
    1. The auditor should modify the audit opinion if the directors have not made adequate disclosure of any material uncertainty related to going concern.
    2. The auditor should modify the auditor’s report without modifying the audit opinion if the directors have appropriately disclosed going concern uncertainties.
    3. Both A&B
    4. None
  1. Auditor shall communicate with those charged with governance about the events or conditions identified that may cast significant doubt on going concern. Such communication shall include:
    1. Whether events or conditions constitute a material uncertainty
    2. Whether use of going concern basis is appropriate
    3. Adequacy of related disclosures in the financial statements
    4. Implications for the auditor’s report.
    5. All of the above

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