IAASB to examine going concern ‘expectation gap’

The International Auditing and Assurance Standards Board (IAASB) has opened a consultation on fraud and going concern in audits, in response to concerns raised by high-profile corporate failures in recent years

The standards body says its discussion paper is aimed at gathering perspectives from a broad range of stakeholders across the financial reporting ecosystem about the role of the auditor.

It is seeking to explore the differences between public perceptions about the role of the auditor and the auditor’s responsibilities with regard to financial statements.

It is looking for views on whether there is an ‘expectation gap’ with regards to fraud and going concern, which includes (among others) knowledge, performance, and evolution gap, and at how this may be narrowed.

Stakeholders will be asked for their perspectives on whether the auditing standards related to fraud and going concern need to be updated to reflect the rapidly evolving external reporting landscape, and, if so, in what areas.

IAASB says the feedback collected will inform decisions about possible further actions on these topics.

Tom Seidenstein, IAASB chair, said: ‘Issues related to fraud and going concern are consistently raised as areas requiring attention and potential improvement in order to enhance confidence in audits.

‘These two topics are priorities in our recently issued strategy and work plan.

‘This discussion paper is an important step in understanding the needs of users of financial reports, how changes in the financial reporting environment impact the role of the audit in terms of fraud and going concern, and the limitations of the existing standards.’

The IAASB is also hosting a roundtable discussion on 28 September that will explore fraud and going concern expectations. The roundtable discussion will be live streamed on the IAASB’s YouTube channel, with un-aired breakout sessions shared via YouTube in October.

The consultation closes on 21 January 2021.

Useful links:

Fraud and Going Concern in an Audit of Financial Statements

Roundtable discussion details

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