March 9, 2017
The American Institute of CPAs’ (AICPA) Auditing Standards Board has issued Statement on Auditing Standards (SAS) No. 132, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern.
The new standard supersedes SAS No. 126 of the same title. It will go into effect for audits of financial statements for periods ending on or after Dec. 15, and for reviews of interim financial information for interim periods beginning after fiscal years ending on or after Dec. 15.
According to the AICPA, the primary objective in issuing the new SAS was to consider the accounting provisos in Financial Accounting Standards Board Accounting Standards Update 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 Governmental Accounting Standards Board Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards.
Here’s a snapshot of the key changes that SAS No. 132 makes to existing auditing standards:
Auditor’s objectives and related conclusions. The new standard clarifies that the auditor’s objectives include separate determinations and conclusions with respect to:
- The use of the going concern basis of accounting, when relevant, in the preparation of the financial statements.
- Whether substantial doubt exists about an entity’s ability to continue as a going concern for a reasonable period of time, based on the audit evidence obtained.
Financial support by third parties or the entity’s owner-manager. SAS No. 132 includes a new requirement and application material with respect to financial support by third parties or the entity’s owner-manager.
Interim financial information. The new standard amends AU-C Section 930, Interim Financial Information, to reflect a new requirement for the auditor 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.
Financial statements prepared in accordance with a special-purpose framework. 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.
Irrespective of whether 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.