ABC Pvt. Ltd., a manufacturing company, is facing significant financial difficulties due to downfall in market and increase in cost of production.…

SA 570, “Going Concern”, deals with the auditor's responsibilities in the audit of financial statements relating to going concern and the implications for the auditor's report. If events or conditions have been identified that may cast significant doubt on the entity's ability to continue as a going concern, the auditor shall obtain sufficient appropriate audit evidence to determine whether or not a material uncertainty exists related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern through performing additional audit procedures, including consideration of mitigating factors. These procedures shall include: (i) Where management has not yet performed an assessment of the entity's ability to continue as a going concern, requesting management to make its assessment. (ii) Evaluating management's plans for future actions in relation to its going concern assessment, whether the outcome of these plans is likely to improve the situation and whether management's plans are feasible in the circumstances. (iii) Where the entity has prepared a cash flow forecast, and analysis of the forecast is a significant factor in considering the future outcome of events or conditions in the evaluation of management's plans for future actions: (I) Evaluating the reliability of the underlying data generated to prepare the forecast; and (II) Determining whether there is adequate support for the assumptions underlying the forecast. (iv) Considering whether any additional facts or information have become available since the date on which management made its assessment. (v) Requesting written representations from management and, where appropriate, those charged with governance, regarding their plans for future actions and the feasibility of these plans.