Explain going concern assessment.
A core Audit & Assurance interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
ISA 570: evaluate management’s assessment for 12+ months from FS date. Look for indicators (financial, operating, other). Test cash flow forecasts, review covenant compliance, read board minutes. If material uncertainty exists and adequately disclosed: unqualified opinion with GC section. If not disclosed: qualified or adverse.
WHAT INTERVIEWERS LISTEN FOR
- ✓ISA 570 standard
- ✓12-month assessment period
- ✓Indicators of going concern issues
- ✓Cash flow forecast testing
- ✓Disclosure and audit opinion impact
COMMON MISTAKES
- ✗Only 12 months from balance sheet date
- ✗Ignoring management's assessment
- ✗Confusing with liquidation basis
You've seen the model answer. Now get graded on yours.
In the interview you won't have this page — you deliver your version on a clock. Practice this and 1,000+ questions with AI feedback on every answer.
RELATED QUESTIONS
- Explain the difference between Emphasis of Matter and Other Matter.
- What do you do if a subsequent event changes the financial statements?
- A client has a significant but routine revenue stream and a smaller, highly complex revenue stream from new, bespoke contracts. Management's estimates for the bespoke contracts are subjective. Which of these, if any, is more likely to be a Key Audit Matter (KAM) and what factors would drive your decision?
- What is the difference between a qualified opinion and an adverse opinion?
- What is a Key Audit Matter (KAM) and how is it determined?
- What is the difference between a modified opinion and a Key Audit Matter (KAM)? Can the same issue be both?