ICAI has released Implementation Guide on ‘Revised SA 570: Going Concern’, for guidance of Members. This guide comprises of responses on key issues of revised SA 570 in question answer format, including checklists, practical case studies, illustrative auditor’s report formats, etc.
ICAI’s Implementation Guide on ‘Revised SA 570: on Going Concern’
This Implementation Guide of ICAI explains about the principles laid down in ‘Revised SA 570: Going Concern’, which is applicable for audits of financial statements for periods beginning on or after 01/04/2017.
Certain fundamental accounting assumptions underlie the preparation of financial statements and going concern is one of those fundamental accounting assumptions. They are usually not specifically stated because their use is accepted and assumed. A disclosure is necessary if they are not followed.
However, when the use of the going concern basis of accounting is not appropriate in the circumstances, management may be required, or may elect, to prepare the financial statements on another basis (e.g., liquidation basis). The auditor may be able to perform an audit of those financial statements provided that the auditor determines that the other basis of accounting is acceptable in the circumstances. The auditor may be able to express an unmodified opinion on those financial statements, provided there is adequate disclosure therein about the basis of accounting on which the financial statements are prepared but may consider it appropriate or necessary to include an Emphasis of Matter paragraph in accordance with Revised SA 706, in the auditor’s report to draw the user’s attention to that alternative basis of accounting and the reasons for its use.
ICAI’s FAQs on ‘Revised SA 570: Going Concern’ (Applicable for FY 2017-18 & onwards)
ICAI has issued a set of FAQs/ Clarifications relating to implementation issues of ‘Revised SA 570: Going Concern’, applicable for the audits of FY 2017-18 and onwards, including reference to various reporting Standards implementation of which has been deferred to FY 2018-19, based on the queries/ concerns received from the members, as under:
ICAI’s FAQs on ‘Revised SA 570: Going Concern’
It may be noted that ICAI had earlier issued ‘Revised SA 570: Going Concern’ along with other ‘Revised SA-700, SA-701, SA-705, SA-706, SA-260’, which were originally announced to be applicable w.e.f. 01/04/2017 (i.e. for audits of financial statements for FY 2017-18 onwards). However, subsequently, the ICAI had deferred the applicability of ‘Revised SA 700’, ‘SA 701′, Revised SA 705’ and ‘Revised SA 706’ by one year, i.e. from 01/04/2018 for audits of financial statements for FY 20118-19 and onwards. Therefore, the ‘Revised SA 260′ and Revised SA 570’ shall continue to be applicable for audits of financial statements for periods beginning on or after 01/04/2017 (FY 2017-18 onwards).
In conclusion, SA 570 (Revised) has brought about significant changes in the auditor’s reporting requirements related to going concern. It is important for auditors to understand the implications of this standard to issue a reliable and informative auditor’s report. The FAQs issued by the Auditing and Assurance Standards Board of ICAI provide clarity on some of the key implementation issues related to SA 570 (Revised). Auditors must refer to these FAQs and other relevant resources to ensure compliance with the applicable standards and regulations. By doing so, auditors can ensure that their audit reports provide meaningful information to users of financial statements, and help to maintain the integrity and transparency of financial reporting.