Going concern – don’t blame the auditor!
One of the most frustrating parts of the role of an external auditor is in relation to going concern. It is the area most likely to result in a difficult conversation with the client and we’re frequently portrayed as being awkward because of the questions we ask.
The bottom line however is that it is the trustees’ (directors’) responsibility to make a full assessment of the charity’s ability to continue as a going concern. This includes robust consideration and challenge of budgets and cash flow projections for at least 12 months from the date of signing the accounts.
If the trustees assess that there are any material uncertainties over whether the charity can continue as a going concern, then they should make appropriate disclosures in the accounts to explain the situation and the nature of the uncertainties.
If the trustees do all of this, then the auditor just needs to review their assessment, including how they have challenged the projections, and conclude whether they think the trustees’ assessment was correct. In doing so, the auditor will ask questions about the projections, but if they have already been robustly considered by the trustees, these will be easy to answer.
The problem comes where the trustees have failed to carry out their responsibilities properly. As auditors, we then need to ask all of the challenging questions. While some may think we’re being awkward, in reality, we’re just trying to help the trustees and do our job.
So, the next time you get frustrated with your auditor’s questions on going concern, pause for a minute and think about whether you’ve discharged your responsibilities properly and don’t give them a hard time!
This blog is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not be used as a substitute for taking professional advice in any specific situation. Wylie & Bisset LLP (and its subsidiary Wylie & Bisset (Audit) Limited) will accept no responsibility for any actions taken or not taken on the basis of this blog. If you would like further advice or would like to discuss any of the issues raised in the blog then please get in touch with your regular Wylie & Bisset contact or use the contact form on our website.