February 22, 2017
The American Institute of CPAs’ Auditing Standards Board has revised its standard for going concern opinions.
The new standard, Statement on Auditing Standards No. 132, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern (AICPA, Professional Standards, AU-C sec. 570), supersedes SAS No. 126 of the same title. SAS No. 132 says the auditor’s objectives include separate determinations and conclusions on the use of the going concern basis of accounting, when relevant, in preparing financial statements. The determinations and conclusions should also be based on the audit evidence on whether substantial doubt exists about an entity’s ability to continue as a going concern for a reasonable amount of time.
SAS No. 132 also includes a new requirement and application material on financial support by third parties or the entity’s owner-manager. The standard amends AU-C 930, Interim Financial Information, to reflect a new requirement for auditors to include an emphasis-of-matter paragraph in the review report when certain conditions or events exist related to substantial doubt about an entity’s ability to continue as a going concern.
SAS No. 132 clarifies that the going concern basis of accounting may or may not be relevant in the preparation of a complete set of financial statements. Whether or not the going concern basis of accounting is relevant in the preparation of special purpose financial statements, the auditor is required to conclude whether substantial doubt exists and to evaluate the possible financial statement effects.
The main goal in the development of SAS No. 132 was to consider the accounting provisions of FASB Accounting Standards Update (ASU) No. 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, and GASB Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards.
The new standard will take effect for audits of financial statements for periods ending on or after Dec. 15, 2017, along with reviews of interim financial information for interim periods beginning after fiscal years ending on or after Dec. 15, 2017.