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 directors had prepared the annual accounts on a going concern basis i.e. whether 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. Some companies have the impression that this issue of evaluation of going concern basis is more concerned with regard to the auditor rather than the Board of Directors. This is not true, management will need to give significant consideration to this area, especially in the current environment and early engagement on this topic will be important. As the situation is changing very rapidly and uncertainties crop up, the assessment by the Board needs to be dynamic and reflect the facts considering the latest conditions and information. Timely and effective communication between the management and the auditor is essential in ensuring that both are able to fulfil their respective responsibilities in relation to going concern aspect during these uncertain times. There are various factors that impact the ability of an entity to continue as a going concern. Out of such factors, the auditor as well as the company needs to essentially consider the impact of COVID-19 on going concern evaluation critically.

For more information