As the COVID-19 crisis takes an ever-greater toll on the American economy, and as multiple well-known companies declare bankruptcy, the going-concern assessment has taken on new relevance for issuers, auditors, and others in the financial-reporting community. As a result, the number of issuer filings that contain a going-concern disclosure appears to have substantially increased.In this piece, we review some of the significant considerations that apply to the going-concern analysis from both the issuer’s and the auditor’s perspectives. The standard specifies that required communications by the auditor to the audit committee should be made in a timely manner, taking into account the significance of the matters involved, and the corrective or follow-up action needed. Communications may be made to only the audit committee chair if done in order to communicate matters in a timely manner during the audit. However, such matters are to communicated to the full committee prior to the issuance of the auditor’s report.

Retaining the records for future audits, as also conduct of quality controls . Require an engagement quality control review for all engagements meeting the criteria established in compliance with subparagraph. The AICPA requires a firm’s equity interests to be accurately recorded in its financial statements.

PCAOB’s Reorganization of Auditing Standards Will Change References to Auditing Standards

All assets, liabilities and equity interests must be recorded on the firm’s balance sheet. The auditor must plan and perform audit procedures to obtain sufficient appropriate audit evidence to provide a reasonable basis for his or her opinion. In either case, however, audit engagement teams should keep in mind that protecting their own, and their firms’, interests depends on the team ensuring that it considers the relevant evidence with appropriate skepticism and documents that its process was thorough and appropriate. Although global pandemics were not included on the list of adverse conditions in either AS 2415 or Subtopic , the economic shock that COVID-19 has created will provide a basis for many companies and auditors to conduct a more searching going-concern analysis than usual in the months to come. As we address in the next section, this analysis will be especially difficult in a crisis such as COVID-19 whose duration and economic effects are so unpredictable.

In the Matter of the Application of Cynthia C. Reinhart, CPA was an appeal to the SEC from sanctions that the https://intuit-payroll.org/ had ordered be imposed on the engagement partner for an audit of a mortgage lender, Thornburg Mortgage, Inc. (“Thornburg”). The PCAOB charged that Ms. Reinhart had, among other things, failed to properly assess whether there was substantial doubt about Thornburg’s ability to continue as a going concern. Concerning the first condition, the standard states that for management’s plans to be considered probable for implementation, they generally must already have been approved by management at the time the financial statements are issued.That is, they should generally not be merely theoretical or even under active consideration. The AICPA issued SAS No. 134 in an effort to provide more transparency into the audit and to emphasize and clarify what is and what is not a responsibility of the auditor and the management of the entity under audit. SAS No. 134 supersedes and replaces guidance in generally accepted auditing standards Section AU-C 700, Forming an Opinion and Reporting on Financial Statements among others relating to auditor reporting standards.

Financial Reporting Controls Program (SAS-

The new Auditing Standard No 15 expands the scope of the auditor’s report for certain public companies while retaining the “pass/fail” opinion of the existing auditor’s report. Most notably, the new standard will require auditors to identify and discuss, in the audit report, “critical audit matters” that were addressed in the audit. SEC reporting companies and their audit committee should initiate a dialogue with their auditors, to the extent they have not already done so, to understand how their auditors expect to approach CAMs, what types of matters may merit this designation and how the auditors expect to address them in the audit report. Third, complications may arise even after the annual audit if the issuer intends to incorporate by reference its financial statements with the Securities and Exchange Commission (“SEC”) as part of a registered offering conducted pursuant to the Securities Act of 1933, as amended. If the issuer does incorporate its financial statements by reference, the issuer is required to obtain the auditor’s consent to include the audit report as part of the registered offering. Depending on the timing, this re-issuance may or may not occur in conjunction with the issuer’s conducting its own quarterly evaluation of its ability to continue as a going concern. Changes have been made to clarify the auditor’s responsibility for other information included in an entity’s annual report as extant standards were not always clear what was in scope for these requirements.

Audit committees may wish to consider what procedures if any should be adopted in order to respond to an inquiry of this type. ISA 600 deals with special considerations that apply to a group audit, including when component auditors are involved. The standard includes new and revised requirements and application material that better aligns the standard with recently revised standards, such as International Standard on Quality Management 1 and International Standards on Auditing 220 and ISA 315 . The new and revised requirements also strengthen the auditor’s responsibilities related to professional skepticism; planning and performing a group audit; two-way communications between the group auditor and component auditors; and documentation.

onsult Paragraphs 48 of PCAOB Auditing Standard No 15…

Accounts balances as of period endExistence — assets, liabilities and equity balances exist. Transactions and eventsOccurrence — the transactions recorded have actually taken place. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. 8/ AU sec. 331, Inventories, establishes requirements regarding observation of the counting of inventory. The audit procedure can be automated effectively and applied to the entire population.