Auditors still responsible for going-concern evaluation under PCAOB rules


Recent changes to U.S. GAAP do not change public company auditors’ responsibilities for following existing PCAOB standards when considering a company’s ability to continue as a going concern, the PCAOB said Monday.

In a staff audit practice alert, the PCAOB said current auditing requirements remain in force in light of FASB’s release in August of a standard defining management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern.

“An auditor’s responsibility to evaluate a company’s ability to continue as a going concern is an important part of the audit,” PCAOB Chief Auditor and Director of Professional Standards Martin Baumann said in a news release. “With the recent changes to U.S. GAAP, the staff is issuing this alert to make clear that current auditing standards remain in effect.”

According to the alert:

  • Auditors should look to the applicable financial reporting framework—whether it’s U.S. GAAP or IFRS—to assess management’s going-concern evaluation and the related financial statement disclosures.
  • Auditors should continue to follow the existing requirements of AU Section 341, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern. This guidance should be used to evaluate 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. Under the standard, the auditor’s evaluation is qualitative.
  • A determination that U.S. GAAP or IFRS does not require a going-concern disclosure for management does not necessarily mean that the auditor is not required to file a going-concern explanatory paragraph under AU Section 341. Auditors are required by AU Section 341 to make a separate evaluation on whether disclosure is necessary in the auditor’s report.

While the current going-concern auditing standard remains in force, the PCAOB is evaluating potential revisions to the standard.

Ken Tysiac ( ) is a JofA editorial director.


Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.


News quiz: Retirement planning, tax practice, and fraud risk

Recent reports focused on a survey that gauges the worries about retirement among CPA financial planners’ clients, a suit that affects tax practitioners, and a guide that offers advice on fraud risk. See how much you know with this short quiz.


Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.