ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which of the following is NOT a goal of ISA 570 relating to going concern?

1. To determine if management's use of the going concern basis is appropriate

2. To evaluate the entity's long-term profitability

3. To identify material uncertainties that may affect going concern

4. To report in compliance with ISA 570

The correct answer is: To evaluate the entity's long-term profitability

The goal of ISA 570, which addresses going concern, focuses on evaluating the appropriateness of management's assessment of an entity's ability to continue as a going concern, identifying any material uncertainties that may impact that assessment, and ensuring the auditor reports in compliance with the standard. The aim of evaluating the entity's long-term profitability is not a core focus of ISA 570. Instead, the standard is concerned with the assessment of the entity's viability in the near future, typically over a 12-month period from the reporting date, rather than making determinations about long-term profitability or performance. The emphasis is on whether conditions exist that may cast significant doubt on the entity's ability to continue its operations, rather than making a broader evaluation of profitability beyond the immediate going concern issues. In contrast, the other options align directly with the objectives of ISA 570. The standard asks auditors to assess management's decisions regarding the use of the going concern basis, identify material uncertainties, and ensure compliance in reporting, which are essential for maintaining transparency and trust in financial reporting.