Going concern is a board judgement, not a note in the accounts
Going concern is a board judgement, not a note in the accounts
Going concern is often treated as a paragraph that gets copied forward each year. It is not. It is a forward looking judgement about whether the company can continue operating for at least twelve months from the date the financial statements are approved, and it belongs to management and the board before it belongs to the auditor.
A defensible assessment has three parts. A cash flow forecast covering the full assessment period, built on assumptions you can support rather than the budget you would like to hit. A sensitivity analysis showing what happens if the main assumptions do not hold, including a delayed collection, a lost contract or a covenant breach. And documented evidence of the support you are relying on, whether that is a committed facility, a shareholder letter or a parent company undertaking, with the terms and duration actually checked.
Auditors are required to challenge this assessment, and a thin file leads to a longer audit and difficult conversations late in the process. BDO Azerbaijan reviews going concern assessments, stress tests forecasts and advises boards on documentation. Contact us to review your going concern file before year end.
A defensible assessment has three parts. A cash flow forecast covering the full assessment period, built on assumptions you can support rather than the budget you would like to hit. A sensitivity analysis showing what happens if the main assumptions do not hold, including a delayed collection, a lost contract or a covenant breach. And documented evidence of the support you are relying on, whether that is a committed facility, a shareholder letter or a parent company undertaking, with the terms and duration actually checked.
Auditors are required to challenge this assessment, and a thin file leads to a longer audit and difficult conversations late in the process. BDO Azerbaijan reviews going concern assessments, stress tests forecasts and advises boards on documentation. Contact us to review your going concern file before year end.