By Mike Bedel, CPA, MBA, CGMA
Partner, Director of Audit & Assurance Services
The AICPA Auditing Standards Board (ASB) has updated their standards on the topic of Going Concern. Statement on Auditing Standards (SAS) No. 132 was issued in February 2017 under the title, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern.
The term “going concern” relates to the expectation that an entity will continue operations in the future. It is often taken for granted, or assumed, that the entity under audit will continue operations in the near future.
These new standards supersede previous guidance that existed for auditing standards, SAS No. 126 (under the same title), and follows recent pronouncements on the same topic by the International Auditing and Assurance Board. In 2014 Accounting Standards Update 2014-15 was issued to place the initial responsibility to identify a going concern on management, before the auditor is required to address the topic.
This most recent update is effective for audits of financial statements for the year ending December 31, 2017.
SAS No. 132 aligns the previous standards more closely with the responsibility placed on management by ASU 2014-15. It also aligns the auditing standards with standards recently issued by the Governmental Accounting Standards Board (GASB).
SAS No. 132, clarifies that the auditor is responsible to determine whether management has appropriately utilized a going concern basis of accounting and whether there are any substantial doubts about the entity’s ability to continue as a going concern in the near future.
SAS No. 132 also adds a requirement to evaluate the reliance upon third parties, owners or management in the organization’s plans to continue as a going concern.
For more information about the topic of Going Concern, please contact Mike Bedel at (317) 613-7852 or email [email protected].