ICAS issues guidance on going concern considerations for auditors
Consolidated Covid-19 guidance for companies and auditors.
ICAS has issued guidance for auditors ‘Covid-19 and Beyond’ on going concern. The auditor’s consideration of going concern has been a key focus of the profession for a number of years; however, the impact of Covid-19 has further intensified the challenges. The pandemic has unfortunately impacted many businesses to a significant degree, including threats to their operations and ongoing viability.
The ICAS guidance has been produced to highlight the considerations that auditors must make, both in relation to Covid-19 challenges, and beyond. It is anticipated that for at least the next 18-24 months there will be a particular challenge for auditors when considering, undertaking and documenting their work around going concern.
This guidance is intended to assist auditors during the conduct of the audit but can also help clients to better understand the expectations around disclosures in the financial statements and in considering the potential impact on the audit report.
In response to concerns around the quality and rigour of audit, ISA (UK) 570 on going concern was revised by the FRC in September 2019. The revised standard comes into effect for periods commencing on 15 December 2019 onwards and requires additional work effort on the part of the auditor, increases the level of documentation required in support of the auditor’s conclusion on going concern, and updates the wording of the audit report.
The guidance covers key areas for auditors to consider given the impact of the pandemic and the enhanced requirements of revised ISA (UK) 570. It is vital that appropriate time and consideration is given to disclosures in the financial statements and in ensuring that the audit files clearly set out the auditor’s considerations, the work undertaken and contain sufficient and appropriate evidence in relation to going concern.