In this comment letter, the CAQ provides views to the IAASB related to its request for comment on its Proposed International Standard on Auditing 570 (Revised 202X) Going Concern and Proposed Conforming and Consequential Amendments to Other ISAs.
The CAQ appreciates the work of the IAASB staff and the Board in developing the Exposure Draft and we are supportive of the Board’s objectives to strengthen the auditor’s evaluation of management’s assessment of going concern and considering ways to enhance transparency with respect to the auditor’s responsibilities and work related to going concern.
Overarchingly, we have three primary concerns about the proposal, as follows:
- Need for Improvements to the Applicable Financial Reporting Framework
The financial reporting framework and auditing standards need to work in concert to drive increased transparency for financial statement users. This cannot be achieved by revising the auditing standards alone. Although outside the scope of the IAASB’s work, it should be a high priority for the IASB to consider potential revisions and enhancements to IAS 1 Presentation of Financial Statements.
- There Are Opportunities to Enhance Scalability
The scalability of the Exposure Draft could be enhanced by explicitly linking the design and performance of audit procedures to the auditor’s risk assessment in the requirements of the proposed standard, allowing the auditor to use professional judgment in determining the nature and extent of audit procedures to be performed related to going concern.
- KAMs Are a Better Approach to Increase Transparency Through the Auditor’s Reporting Requirements
While we appreciate the IAASB’s desire to explore additional transparency for users of audited financial statements about the auditor’s responsibilities and work relating to going concern, we do not support the proposed requirements related to the addition of the new “Going Concern” section in the auditor’s report. A better approach to disclosure would be for the auditor to use professional judgment to determine whether to include audit matters related to going concern in the auditor’s report as a KAM (in accordance with the framework set forth in ISA 701 (Revised)).
Read the full comment letter here.