On February 22, 2017, the American Institute of Certified Public Accountants (AICPA) Auditing Standards Board issued Statement on Auditing Standards No. 132 (SAS No. 132) addressing the auditor’s consideration of an entity’s ability to continue as a going concern. SAS No. 132 supersedes SAS No. 126, which was issued in July 2012. This new standard emphasizes the role of management and its analysis of the entity’s ability to continue as a going concern for a reasonable period of time, defined as one year from the time that the financial statements are available to be issued unless otherwise noted. This approach is consistent with the recent Accounting Standards Update (ASU) issued in August of 2014 by the Financial Accounting Standards Board (FASB): ASU No. 2014-15.
The auditor’s primary objectives of this standard will be to obtain sufficient appropriate audit evidence to (1) conclude on the appropriateness of management’s use of going concern accounting, (2) conclude on whether substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time exists, and (3) evaluate the possible financial statement effects and adequacy of disclosure regarding going concern matters.
The standard requires that these objectives be considered during risk assessment procedures and that the auditor remains alert throughout the audit for possible conditions that would raise substantial doubt about an entity’s ability to continue as a going concern for a reasonable period in time. SAS No. 132 also provides guidance related to the appropriateness of use of going concern basis of accounting, adequacy of related disclosures, and effect on the auditor’s report.
SAS No. 132 will be effective for audits of financial statements for the periods ending on or after December 15, 2017. Click the following link for the full standard: AICPA_SAS_No._132