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[answered] about:reader?url=https://www.linkedin.com/pulse/going-conce


Required:

Using the AREA framework, answer the following question:

the following media coverage of Slater and Gordon?s financial performance and position is published and available on Blackboard (together with the FY16 Slater and Gordon Annual Report and media announcements):

the sale of debt by major lenders who advanced funds to slater and Gordon; and the Class action against Slater and Gordon by shareholders who purchased shares during the period from 30 March 2015 to 24 February 2016

  • in your opinion, do you think the audited statutory financial statements and MEDIA/ ASX Announcements adequately informed users of the underlying financial health of the business. In your response, consider:
  • The Adequacy of legal or accounting standard requirements; and
  • the?social?impact?of?corporate?collapses?and?the?role?of?financial??reporting?in?capital?markets?
  • 1.?ANALYSE
  • 2.RESEARCH
  • 3.CONCLUSION

about:reader?url=https://www.linkedin.com/pulse/going-concern-under-enhanced-audit-reporting-standards-colin-parker?trk=hp-feed-article-... linkedin.com #Going-concern under enhanced #audit reporting

 

standards

 

Colin Parker While reporting of key audit matters (#KAMs) by listed entities has grabbed much recent attention,

 

several other new changes will affect financial statements. They are new audit-report formatting and content, considering ?other information? to be presented

 

with audited statements, disclosures, and the going-concern basis. The suite of enhanced standards

 

apply to reporting periods ending after 15 December. Going-concern considerations can be among the most challenging and judgmental aspects of

 

auditing. The enhanced standards: ? Give more prominence to the going-concern basis by a paragraph in the report (and in an auditor?s

 

description of management?s responsibilities) ? Replace ?Emphasis of Matter? with ?Material Uncertainty ? Going Concern Basis? ? Address the relationship between a material uncertainty and a key audit matter, and ? Push further disclosure considerations when events and conditions have been identified but no

 

material uncertainty exists (the so-called ?near miss?). There is now an explicit going-concern statement in audit reports. To refresh your memory, it is: ?As part of an audit in accordance with the Australian Auditing Standards, we exercise professional

 

judgement and maintain professional scepticism throughout the audit. We also: Conclude on the

 

appropriateness of the directors? use of the going concern basis of accounting and, based on the audit

 

evidence obtained, whether a material uncertainty exists related to events or conditions that may cast

 

significant doubt on the Company?s ability to continue as a going concern. If we conclude that a

 

material uncertainty exists, we are required to draw attention in our auditor?s report to the related

 

disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our

 

conclusions are based on the audit evidence obtained up to the date of our auditor?s report. However, 1 of 3 12/12/2016 8:29 pm about:reader?url=https://www.linkedin.com/pulse/going-concern-under-enhanced-audit-reporting-standards-colin-parker?trk=hp-feed-article-... future events or conditions may cause the Company to cease to continue as a going concern.? This statement and related changes to ASA 570 Going Concern require an auditor to have a thoughtful

 

approach to the risk associated with using the going-concern basis generally and, in particular, where

 

there is a related material uncertainty. In the latter case, an ?Emphasis of Matter? paragraph no longer applies. Instead, there is a new

 

paragraph headed ?Material Uncertainty Related to Going Concern?, which in part states: ?As stated in

 

Note X, these events or conditions, along with other matters as set forth in Note X, indicate that a

 

material uncertainty exists that may cast significant doubt on the Company?s ability to continue as a

 

going concern. Our opinion is not modified in respect of this matter?. Audit reports reference relevant note(s) in financial statements (general-purpose or special-purpose)

 

that need to comply with relevant accounting standards. In general-purpose statements, appropriate

 

disclosure of a material uncertainty requires various considerations to tell the going-concern story. They include such matters as: ? The disclosure of material uncertainties (AASB 101 Presentation of Financial Statements) ? The concept of fair presentation, the judgements made in applying accounting policies, and capital

 

management (AASB 101) ? Liquidity risk disclosure (AASB 7 Financial Instruments: Disclosure), and ? Subsequent events (AASB 110 Subsequent Events). The auditor needs to be satisfied that appropriate disclosures are made, otherwise a modified opinion

 

will need to be issued concerning inadequate disclosure. An auditor must consider whether there is adequate disclosure of the following: ? The principal events or conditions that might cast significant doubt on the entity?s ability to

 

continue as a going concern ? Management?s plans to deal with these events or conditions, and ? That there is a material uncertainty related to events or conditions that might cast significant 2 of 3 12/12/2016 8:29 pm about:reader?url=https://www.linkedin.com/pulse/going-concern-under-enhanced-audit-reporting-standards-colin-parker?trk=hp-feed-article-... doubt on the entity?s ability to continue as a going concern and, therefore, that it might be unable to

 

realise its assets and discharge its liabilities in the normal course of business. ASA 570 now addresses what is becoming known as a ?near miss?: ?If events or conditions have been

 

identified that may cast significant doubt on the entity?s ability to continue as a going concern but,

 

based on the audit evidence obtained the auditor concludes that no material uncertainty exists, the

 

auditor must evaluate whether, in view of the requirements of the applicable financial reporting

 

framework, the financial report provides adequate disclosures about these events or conditions?. The ?near miss? rule should result in the auditor?s prompting the preparer to revisit the adequacy of

 

disclosures around going concern. Near-miss disclosures revert back to the reporting framework being

 

applied. Perplexingly, a ?near miss? can give to a key audit matter, but a material uncertainty related to going

 

concern does not. The key-audit-matter section contains only a cross-reference to the materialuncertainty paragraph. Preparers need to take a good look at what the new audit reporting says about your responsibilities

 

regarding going concern. Its application can be difficult. Preparers and auditors needs to be on top of their game, particularly

 

where there are near misses or material uncertainties. Colin Parker is principal GAAP Consulting and team advisory and #litigation services. He is a former

 

member of the #AASB and editor of GAAP Alert (www.gaap.com.au). Colin and Sonya Sinclair

 

reviewed the going concern requirements in the December 8 #GAAPinar No.10 Enhanced Audit

 

Reporting Standards ? 31 December year ends. Recording are available. ? GAAP Consulting 2016 3 of 3 12/12/2016 8:29 pm

 


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