The International Auditing and Assurance Standards Board proposed revisions to its current going concern standard with the goal of improving transparency and consistent practices.
The proposed changes to International Standard on Auditing 570 (Revised), Going Concern, aim to promote consistent behavior and facilitate effective responses to identified risks of material misstatement related to going concern. The changes would strengthen the auditor’s evaluation of management’s assessment of going concern, including reinforcing the importance, throughout the audit, of the appropriate exercise of professional skepticism.
Other changes try to improve transparency when it comes to the auditor’s responsibilities and work related to going concern where appropriate, including strengthening communications and reporting requirements.
The Public Company Accounting Oversight Board is also looking to overhaul its going concern standard in the U.S., along with other auditing standards it inherited two decades ago from the American Institute of CPAs (see story).
The IAASB noted that the revisions are prompted by ongoing uncertainties in the broader economic environment, corporate failures across the globe in recent years, and the more recent turmoil in the financial services sector that have cast a spotlight on the topic of the ability of a company to continue as a going concern. Other conditions, including war and the COVID pandemic, have also heightened risks and focused attention on the challenges and issues related to auditors’ responsibilities and work related to management’s assessment of an entity’s ability to continue as a going concern.
“Investors, regulators, and other stakeholders have repeatedly called for more robust audit procedures related to going concern and for increased transparency regarding that work in the auditor’s report,” said IAASB chair Tom Seidenstein in a statement Wednesday. “The revisions proposed today are a step in that direction. The proposals seek to strengthen going concern requirements by substantially enhancing the auditor’s work effort in relation to going concern and providing enhanced, entity-specific information in the auditor’s report.”
The IAASB is asking for comments on the proposed revisions by Aug. 24, 2023.
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