FRC consults on stronger Going Concern standard for auditors

05 March 2019

The FRC proposes to increase the work required of auditors when assessing whether an entity is a going concern.

The consultation on important revisions to International Standard on Auditing (ISA) (UK) 570 Going Concern follows concerns about the quality and rigour of audit and well-publicised corporate failures where the auditor’s report failed to highlight concerns about the prospects of entities which collapsed shortly after as well as findings from recent FRC Enforcement cases.  In proposing these revisions, requirements on UK auditors will be significantly stronger than those required by international standards.

The FRC proposes:
 

• auditors make greater effort to more robustly challenge management’s assessment of going concern, thoroughly test the adequacy of the supporting evidence, evaluate the risk of management bias, and make greater use of the viability statement;
• improved transparency with a new reporting requirement for the auditor to provide a conclusion on whether management’s assessment is appropriate, and to set out the work they have done in this respect; and
• a stand back requirement to consider all of the evidence obtained, whether corroborative or contradictory, when the auditor draws their conclusions on going concern.

The consultation period closes at 5pm on Friday 14 June 2019.

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