Evaluating potential going concern issues was a hot topic for companies and their auditors for 2020 year-end reporting. As many chief financial officers and accounting executives are preparing for first-quarter 2021 reporting, they find the business disruptions and uncertainties from the COVID-19 pandemic and its economic impacts are still with them and continue to pose reporting challenges.
Accounting and auditing standards for going concern require management and auditors to share the responsibility for analyzing and reporting whether there are conditions or events that raise substantial doubt about the company’s ability to continue as a going concern within one year after the date the financial statements are issued or available to be issued. Management must perform this evaluation at every interim and annual reporting date. This exercise is no longer as simple and routine as in the past, requiring more than a review of budgets and short-term financial commitments. Assumptions must be made about the timing and extent of any expected turnaround in the economy and effects on the company.
