{"id":3733,"date":"2020-05-26T14:11:27","date_gmt":"2020-05-26T14:11:27","guid":{"rendered":"https:\/\/sloane.co.uk\/finance\/blog-post\/financial-reporting-blog-post\/auditing-going-concern-covid-19-impacts\/"},"modified":"2020-06-10T14:41:12","modified_gmt":"2020-06-10T14:41:12","slug":"auditing-going-concern-covid-19-impacts","status":"publish","type":"post","link":"https:\/\/sloane.co.uk\/finance\/blog-post\/financial-reporting-blog-post\/financial-reporting-financial-reporting-blog-post\/auditing-going-concern-covid-19-impacts\/","title":{"rendered":"Auditing going concern: COVID-19 impacts"},"content":{"rendered":"
Auditing going concern: COVID-19 impacts<\/p>\n<\/p>\n
The audit of going concern is governed by ISA (UK) 570, Going Concern<\/em>. The current version of this standard is the one revised in 2016<\/a>, but a new version, revised in September 2019<\/a>, takes effect for accounting periods beginning on or after 15 December 2019 and is available for early adoption.<\/p>\n Although you may prefer not to adopt the new version yet, the increased detail it contains is useful and the FRC\u2019s guidance<\/a> for auditors in the current situation is encouraging reference to it, particularly for reporting requirements.<\/p>\n Whichever version of ISA (UK) 570 you use, there are some common threads:<\/p>\n In the current environment, the risk assessment of going concern is likely to look very different to that from previous years. It is vital that the auditor engages with management to establish what work has already been done on the business\u2019s viability and hence going concern status.<\/p>\n Many businesses will be facing enormous challenges such as:<\/p>\n The business and the auditor will need to allow extra time for the impact of the virus to be fully considered, meaning that sticking to the normal reporting deadline could be a problem. For this reason, private companies may apply to Companies House to seek an extension<\/a> of three months to their filing deadline and listed companies<\/a> have an additional two months for their accounts.<\/p>\n For the auditor to express an opinion on the going concern status of an entity, they first need to have management\u2019s assessment. Smaller or less complex entities may not usually prepare formal forecasts or set out all their assumptions. In the current environment\u00a0this will be vital, so the auditor may have to provide some prompts to businesses less familiar with the process.<\/p>\n Clients may ask for their auditor\u2019s help in preparing forecasts or carrying out sensitivity analyses on the various assumptions. However, as auditors, we need to maintain our independence and so we must consider if the FRC Ethical Standard<\/a> precludes the auditor assisting, or whether adequate safeguards can be put in place.<\/p>\n Once management has provided a going concern assessment the auditor must look at all aspects, including (but not limited to):<\/p>\n\n
Risk assessment<\/h3>\n
\n
Auditing management\u2019s assessment of going concern<\/h3>\n
\n
\n