United States

Auditor’s consideration of ability to continue as a going concern

FINANCIAL REPORTING INSIGHTS  | 

The American Institute of Certified Public Accountants Auditing Standards Board (ASB) recently issued a proposed Statement on Auditing Standards (SAS), The Auditor’s Consideration of an Entity’s Ability To Continue as a Going Concern. If this proposed SAS is finalized, the most significant changes from existing standards include the following:

  • For audits of special purpose frameworks and audits of single financial statements and specific elements, accounts, or items of a financial statement, the application guidance would include as an example that the requirement to consider fair presentation includes an evaluation of whether disclosures related to risk and uncertainties are needed to achieve fair presentation. This evaluation should be performed without connecting to the conclusion of whether there is substantial doubt about the entity’s ability to continue as a going concern as set out in AU-C 570, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern. If the going concern basis of accounting is applicable in the preparation of financial statements prepared in accordance with a special purpose framework, the ASB proposes that AU-C 570 applies.
  • The proposed SAS would amend AU-C 930, Interim Financial Information, to require performing review procedures to address the situations when the applicable financial reporting framework includes requirements for management to evaluate the entity’s ability to continue as a going concern for a reasonable period of time in preparing interim financial information. The proposed amendments to AU-C 930 also reflect a new requirement for the auditor to include an emphasis-of-matter paragraph in the auditor’s report when certain conditions or events exist related to substantial doubt about an entity’s ability to continue as a going concern.

If adopted, the proposed SAS would be effective for audits of nonissuer financial statements for periods ending on or after December 15, 2017 and for interim periods beginning thereafter. The proposed SAS is available for comment until September 5, 2016.