The Board of Directors of every company are required to make a statement in the Directors’ Responsibility Statement referred to in Section 134(5) of the Companies Act, 2013 that the annual accounts are prepared on a going concern basis i.e. the Board has a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment.
Given the economic uncertainty created by the pandemic COVID-19 coupled with significant business disruptions for entities across almost all sectors, there is likely to be an increase in events and circumstances which may cast significant doubt on an entity’s ability to continue as a going concern. Therefore, management may need to assess whether going concern assumption is still appropriate as a basis for the preparation of the company’s financial statements.
On 10th May 2020, Auditing and Assurance Standard Standards Board (AASB) of the Institute of Chartered Accountants of India (ICAI) have issued guidance on going concern assessment amid COVID-19 by management and considerations for an auditor while evaluating the management’s assessment. This guidance includes specific 11 FAQs to deal with the various situations in the current environment.
For details, please refer the attached document:Going Concern – Key Considerations for Auditors amid COVID 19
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