The International Auditing and Assurance Standards Board (IAASB) has issued proposed revisions to its current standard on going concern, International Standard on Auditing 570 (Revised), Going Concern.
The proposed changes include the promotion of consistent practice and behavior and facilitate effective responses to identified risks of material misstatement related to going concern; to 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; and to enhance transparency with respect to the auditor’s responsibilities and work related to going concern where appropriate, including strengthening communications and reporting requirements.
High-quality audits support the smooth functioning of capital markets, overall economic performance, and financial stability. The 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 have put a spotlight on the topic of going concern. In addition, conditions, such as war and the global 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.
IAASB chair, Tom Seidenstein, commented: “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.
“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.”