The Public Company Accounting Oversight Board has released a Staff Audit Practice Alert to remind auditors to continue to follow the existing PCAOB standards when they are considering a company's ability to continue as a going concern.

The PCAOB issued the alert in response to recent changes in U.S. GAAP about disclosure of uncertainties about a company's ability to continue as a going concern (see FASB Releases Guidance on Going Concern Uncertainties).

"An auditor's responsibility to evaluate a company's ability to continue as a going concern is an important part of the audit,” said PCAOB chief auditor and director of professional standards Martin F. Baumann in a statement. “With the recent changes to U.S. GAAP, the staff is issuing this alert to make clear that current auditing standards remain in effect.”

The alert said that auditors should look to the applicable financial reporting framework—whether U.S. GAAP or International Financial Reporting Standards—to assess management's going concern evaluation and the related financial statement disclosures.

The alert also specified that auditors should continue to look to the existing requirements of the PCAOB’s own going concern standard, AU sec. 341, when evaluating whether the auditor's report requires an explanatory paragraph disclosing the auditor's substantial doubt about a company's ability to continue as a going concern. The PCAOB staff also noted that the auditor’s evaluation is qualitative based on the relevant events and conditions and other considerations set forth in AU sec. 341.

A determination that no disclosure is required under U.S. GAAP or IFRS, as applicable, is not conclusive as to whether an explanatory paragraph is required under AU sec. 341, according to the staff alert. Auditors should make a separate evaluation of the need for disclosure in the auditor’s report in accordance with the requirements of AU sec. 341, the PCAOB staff recommended.

The PCAOB noted that its standard-setting agenda includes a project to consider potential revisions to the going concern standard, AU sec. 341.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access