Auditor’s and Management’s New Approach Regarding the Going Concern Assessment

• In Event: Contempary Issues in Auditing and Data Analytics

Abstract

With the issuance of Accounting Standards Update No. 2014-15 (ASU 2014-15), Presentation of Financial Statements – Going Concern (Subtopic 205-40):Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Financial Accounting Standards Board (FASB) has changed the focus of the Going Concern (GC) assessment from the auditor to management. Prior to this new standard, AICPA AU-C Section 570 and PCAOB AU Section 341, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern, provided standards for consideration and disclosure of GC for audits. Despite some overlap of the FASB’s new standard with existing auditing standards, some significant differences arose, causing the AICPA to issue AU-C Section 9570, The Auditor’s Consideration of the an Entity’s Ability to Continue as a Going Concern: Auditing Interpretations of AU-C Section 570. We discuss the AICPA’s resolution of these differences and implications for practicing auditors with a summary in Exhibit 1. We also highlight differences between the US and international accounting and auditing standards.

Authors

• Alan Reinstein, Wayne State University

• Stefanie Tate, University of Massachusetts-Lowell