Managers' and Auditors' Responsibilities for Evaluating Going Concern

During and shortly after the global financial crisis, critics complained that too many auditors failed to flag their clients' financial vulnerabilities. Since then, both the Financial Accounting Standards Board (FASB) and the Auditing Standards Board (ASB) have issued new standards increasing managers' and auditors' responsibilities for evaluating an entity's ability to continue as a going concern. Accounting Standards Update (ASU) No. 2014-15 defines substantial doubt, requires managers to evaluate every reporting period whether there are adverse conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and specifies information to be disclosed in the financial statements when such adverse conditions or events exist. Statement on Auditing Standards (SAS) No. 132 requires auditors to assess the appropriateness of the entity's use of the going concern basis of accounting, assess whether substantial doubt exists about the entity's ability to continue as a going concern, and evaluate whether the financial statement disclosures regarding going concern are adequate. Both standards bring American accounting and auditing practices into closer conformity with international standards. (c) 2018 Wiley Periodicals, Inc.