As the effects of the financial crisis and an uncertain economy continue to create volatility in the markets, the International Auditing and Assurance Standards Board has reiterated its position that auditors and those charged with corporate governance that management's use of the going concern assumption is a matter to be considered on every audit engagement.
“Difficult economic conditions give rise to many important audit considerations, but none more important — or more difficult—than evaluating management’s assessment of an entity’s ability to continue as a going concern and determining the appropriate auditor reporting in the circumstances,” said Professor Arnold Schilder, chairman of the IAASB. “Auditors must remain alert throughout the audit for evidence of events or conditions that may cast significant doubt on an entity’s ability to continue as a going concern."
Schilder referenced the IAASB's 2009 Staff Audit Practice Alert: “Audit Considerations in Respect of Going Concern in the Current Economic Environment,” which highlights the consideration of the going concern assumption in the preparation of financial statements.
"Auditors are encouraged to review the Alert and, importantly, the relevant requirements in the International Standards on Auditing,” added Schilder.
