Callie Peters is completing the audit of MakingNewFriends.com for the year ended December 31, 2020. Callie has been the audit manager on this engagement for the past three years. MakingNewFriends.com issued shares two years ago, but has had difficulty establishing a loyal client base and generating advertising revenues. In reviewing results for the current year, Callie noted the client has had operating losses for the past three years, and its working capital ratio has declined from 1.2 in 2019 to 0.9 in 2020. Callie discussed plans for the future with the management of MakingNewFriends.com, which indicated that it is planning to obtain debt financing in 2020; however, management has not yet secured the financing with a bank. Management also indicated that it was aggressively pursuing new advertising contracts and plans to increase advertising revenues by 20 percent in 2021.

REQUIRED
a. Refer to CAS 570 and explain the auditor’s obligation to consider whether the client can continue as a going concern.
b. Over what time period is the auditor required to consider the client’s ability to continue as a going concern?
c. What factors discussed above are relevant for a going-concern assessment for Making New Friends. com? What additional information might the auditor consider in the going-concern assessment?
d. What responsibility does the auditor have to evaluate whether management’s plans will be effective?