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A Ltd company prepares it financial statements as usual though it 's90% of the assets have been damaged in a fire broke out in their factory.As an auditor which fundamental accounting assumption needs to be reviewed.
Going concern: The enterprise is normally viewed as a going concern, i.e. as continuing operations for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation, unless and otherwise the management is notified to the auditor about the companies intention to liquidate.
There are only three basic assumptions under every accounting information i.e.:
And some have stated that there are five basic assumptions:
However, if we are preparing financial statements according to IAS1 then fundamental accounting assumptions for preparing financial statements are as follows:
Among these five, first three are given more importance as they least affected by situations and other requirements of IASs.
In such case its necessary to determine the company's GOING CONCERN
The auditor should assess the enterprise's ability to continue its operation in the coming twelve months........
Agree with Mr. VENKITARAMAN KRISHNA MOORTHY