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| Bangladesh Standard on Audit(BSA-570) |
What is the Bangladesh standard on Audit-BSA-570? Describes in details:
Bangladesh Standard on Auditing (BSA) 570, titled "Going Concern", provides guidance to auditors on how to assess an entity's ability to continue as a going concern. The going concern assumption is fundamental in the preparation of financial statements, meaning that the company is expected to continue its operations for the foreseeable future without the need for liquidation or significant downsizing.
Here are the key points of BSA 570:
1.Objective:
The primary objective of BSA 570 is to guide auditors in evaluating whether there are significant doubts about the entity's ability to continue as a going concern, and to determine the appropriate audit response if such doubts exist.
2.Management’s Responsibility:
Management is responsible for assessing the entity's ability to continue as a going concern.
The financial statements should be prepared on a going concern basis unless management intends to liquidate the entity or cease operations.
3.Auditor’s Responsibilities:
The auditor needs to evaluate management’s assessment of the going concern assumption and determine if there is any material uncertainty related to the entity's ability to continue as a going concern.
The auditor must gather sufficient appropriate audit evidence about the going concern assumption, considering factors like financial difficulties, liquidity problems, or adverse market conditions.
If the auditor identifies significant doubt about the entity's ability to continue as a going concern, they need to consider the adequacy of disclosures made by management in the financial statements.
4.Indicators of Going Concern Issues:
Financial difficulties such as ongoing operating losses, negative cash flows, and inability to meet debt obligations.
Legal or regulatory actions, such as pending litigation or loan covenant breaches.
Inability to raise capital or secure necessary funding.
5.Audit Procedures:
The auditor must review the entity's financial position, management’s plans, and the nature of the uncertainty that may affect the going concern assumption.
The auditor should inquire about management’s plans to mitigate the risks, including obtaining financial forecasts, budgets, or future plans for addressing financial difficulties.
6.Evaluating the Going Concern Assumption:
If the auditor identifies a material uncertainty, they should ensure that management has disclosed this uncertainty adequately in the financial statements.
If management fails to disclose the going concern uncertainty, the auditor may issue a qualified or adverse opinion, depending on the severity of the issue.
7.Reporting:
If there is significant doubt about the entity's ability to continue as a going concern, the auditor should include an emphasis of matter paragraph in the audit report, highlighting the uncertainty.
If the financial statements fail to disclose the going concern issue, the auditor may issue a modified opinion (qualified or adverse).
8.Time Frame for Going Concern:
The assessment of going concern should cover at least twelve months from the balance sheet date, though the auditor may extend the period depending on the circumstances.
In summary, BSA 570 requires auditors to carefully assess the going concern assumption in the financial statements, identify potential risks to the entity's continued viability, and ensure appropriate disclosures are made. If significant doubts arise about the going concern, the auditor must modify their report accordingly.