Page 17 - GOING CONCERN AND RELATED ISSUES

GOING CONCERN AND RELATED ISSUES

Trading whilst Insolvent (continued...)

Responses to factual insolvency by companies and the
auditor’s considerations

• In order to avoid an RI being reported to the IRBA, the
company’s management may attempt to persuade the

external auditor that there is no irregularity as all creditors

will be paid, for example, due to:

a) An imminent share issue which will restore the entity to
solvency;

b) A subordination (backranking) agreement that has been
signed by a substantial creditor;

c) The company earning sufficient profits to restore the entity
to solvency;

d) Letters of support/ comfort;

e) Guarantees; and/ or

f) Initiation of business rescue.

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