Consultation Paper on the exposure of the IAASB’s proposed ISA 570 (Revised), Going Concern
Wednesday, May 3, 2023
The AUASB has released a Consultation Paper seeking public comment on the IAASB’s Exposure Draft on International Standard on Auditing (ISA) 570 (Revised), Going Concern.
The current ISA 570 addresses the auditors responsibility in concluding on the appropriateness of management’s use of the going concern basis of accounting and to conclude on whether a material uncertainty exists.
In addition to the invitation to comment on the Consultation Paper, the AUASB has released an educative webcast about the key themes and changes that the Proposed ISA 570 (Revised) Going Concern seeks to address.
The key proposed enhancements to the standard include:
- Defining the term “material uncertainty (related to going concern)” and providing clarity for other terminology used in the standard (e.g., for the phrase “may cast significant doubt”).
- Changing the commencement date of the period of management’s assessment of an entity’s ability to continue as a going concern to at least twelve months from the date of approval of the financial statements.
- Strengthening requirements that:
- Drive the auditor to obtain information that is relevant to the timely identification of events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern; and
- Require a more robust evaluation of management’s assessment, including evaluating the method, assumptions and data used by management.
- New requirements when management’s plans for future actions include financial support by third parties or related parties, including the entity’s owner-manager, for the auditor to evaluate the intent and ability of those parties to maintain or provide the necessary financial support.
- Enhancing requirements and application material to enable a more robust exercise of professional skepticism when performing audit procedures, including when evaluating whether there are indicators of possible management bias.
- Enhancing application material addressing scalability, which includes examples that demonstrate how the nature and extent of the auditor's procedures may vary based on the nature and circumstances of the entity.
- With respect to the auditor’s work related to going concern:
- Emphasizing how information from sources external to the entity may be leveraged; and
- Modernizing the standard for the impact of technology.
- Strengthening the requirements for timely, two-way communications with those charged with governance and including new requirements for communication with appropriate external parties.
- Enhancing transparency about going concern in the auditor’s report, including:
- Providing explicit statements about going concern in all instances (i.e., for audits of financial statements of all entities); and
- For audits of financial statements of listed entities, describing how the auditor evaluated management’s assessment.
The AUASB invites all stakeholders to comment on all or some of the questions contained in the AUASB Consultation Paper by 14 August 2023 via the AUASB website. Stakeholders may elect to provide comments directly to the IAASB. In this case, the AUASB request a copy is provided to us.
The AUASB will be holding roundtable events in late July/early August 2023, to provide stakeholders an opportunity to provide feedback directly. Details for registration at these events will be provided shortly.
Stakeholders’ feedback will be used to inform the AUASB in its formal response to the IAASB on the IAASB Exposure Draft.
Any queries about the Consultation Paper and the AUASB’s associated outreach activities should be directed to Anne Waters, AUASB Deputy Technical Director, at [email protected].