NFRA flags gaps in going concern audits, asks auditors to challenge forecasts

The National Financial Reporting Authority (NFRA) has raised concerns about how auditors assess going concern, particularly regarding cash flow projections, management assumptions, and financial support from promoters. Speaking at an NFRA webinar, chairperson Nitin Gupta said audit files often lack evidence of the work linking management's assessment to the auditor's final conclusion. He stressed that rigour must precede documentation and warned against applying audit methodology mechanically.

Gupta said auditors must distinguish between a promoter's intention to provide financial support and their actual ability to do so. He noted that intent is frequently documented but ability is not examined with comparable vigour. The panel, featuring CA Guru Prasad and CA Aniruddh Sankaran, discussed the need to challenge management's assumptions, assess the reliability of underlying data, and examine the source and purpose of proposed funding.