In this question, candidates were required to define going concern and discuss auditors’ responsibilities with respect to going concern.

The question was worth 4 marks. The first requirement verb define implied that a basic statement of going concern was needed, probably for one mark. The second requirement verb of discuss, without a scenario, indicated that three points were needed; one mark per point.

A minority of candidates did obtain two definition points by linking their definition to the ISA, although in common with other questions in this exam, there was no need to state the ISA number.

Most candidates identified the mark allocation, although only managed to provide one auditor responsibility. The average mark for this question was therefore two. Very few candidates mentioned responsibilities such as reporting to members or discussing the going concern concept with the directors.

Example comments provided and reasons why those comments did not obtain a pass standard are noted below:

Answer comment
“Going concern means that the company will be in existence for the unforeseeable future.”

Examiners assessment of comment
This was a very common comment. The term unforeseeable was normally allowed on the assumption that candidates are unclear of the exact English here.

Answer comment
“The auditor is responsible for ensuring that the company will be a going concern by producing cash flow forecasts and other documentation to prove this.”

Examiners assessment of comment
No – the auditor reviews information provided by the directors. The responsibility is to test the going concern assumption, not “prove” that it is correct; in theory the auditor can never be 100% sure that the assumption is correct anyway.

Other common errors included:

• Stating lots of audit procedures that the auditor could carry out. While the auditor is responsible for reviewing the going concern assumption, how the auditor obtains evidence to meet that responsibility is a different issue and therefore not relevant to this particular question. Candidates are advised to read all of the question requirements initially – part (b) would then be identified as the section requiring audit procedures on the going concern concept.
• Stating that it was the auditor’s responsibility to prepare financial statements on the going concern basis.

This is not the case, the auditor has a responsibility to audit the financial statements, not prepare them.

Overall, the standard for this question was average only due to the lack of explanation of auditor responsibilities.