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Sai asked 1 year ago

   What is the difference between material uncertainty and significant events casting doubt on entity going concern and assumption of going concern

1 Answers
RaviRavi Staff answered 1 year ago

Lets take financial issues as example

Significant events casting doubt over going concern — negative cashflow from 3 years, low current assets as compared to high current liability, bank loan repayment scheduled after year end

Material Uncertainty — further as we performed additional procedures we came to know it is unlikely operations would generate cash for repayment, management is in talk with bank they may or may not renew loan, other bank may or may not help, holding company may or may not help, asset sale may or may not happen
now these are uncertainties which are of big magnitude and likely hood, we cannot hide it from stakeholders, we need to inform them, they should be disclosed in notes to accounts

Going Concern Invalid— Now if probability of adverse events is higher with no visible mitigating factors (compensating factors) then going concern assumptions is invalid. All banks and holding company said no or probability of no is high, to refinance existing loan.

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