Staff Audit Practice Alert Issued for Going Concern
Reminding auditors to continue abiding by its current standards in spite of recent U.S. GAAP changes related to recognizing a company’s ability to continue as a going concern, the Public Company Accounting Oversight Board (“PCAOB”) has issued Staff Audit Practice Alert No. 13, Matters Related to the Auditor’s Consideration of a Company’s Ability to Continue as a Going Concern. The alert informs auditors to reference the appropriate financial reporting framework, U.S. GAAP or International Financial Reporting Standards (IFRS), to review management’s going concern evaluation and its related financial statement disclosures.
Staff Audit Practice Alert No. 13 also advises auditors to continue using PCAOB AU sec. 341, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern, when deciding if the auditor’s report needs an explanatory paragraph disclosing substantial doubt about a company’s ability to continue as a going concern. Additionally, the alert notes that the auditor’s evaluation is qualitative per relevant events and conditions, as well as other considerations stated in AU sec. 341. However, auditors are asked to separately evaluate whether a disclosure is necessary in their report, in agreement with AU sec. 341 requirements.
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