CPAB Project – Going Concern [Completed]

Next Steps:

In 2020, the CPAB plans to continue to seek Canadian perspectives on this issue and has organized a working group to carry our further work

Last up­dated:

January 2020


The financial health and ability of reporting issuers to continue as a going concern is important information for users of financial statements. The auditor’s responsibility is to obtain sufficient appropriate audit evidence about management’s use of the going concern assumption in the preparation of the financial statements and to conclude whether there is a material uncertainty about the entity’s ability to continue as a going concern.

The Canadian Public Accountability Board (CPAB) launched a project in 2019 on this topic. CPAB gathered information to obtain a better understanding of how auditors approach their work to review management’s assessment of going concern risk.

Specifically, during 2019, CPAB reviewed a sample of Canadian reporting issuers where management (and the auditor’s report) did not disclose a going concern risk but where the company had shown some recent financial difficulties. CPAB selected sample files from publicly available information on all Canadian publicly listed companies in all sectors and looked for indicators of financial challenges, including: significant declines in market capitalization; high and increasing debt as a percentage of assets; weakening financial performance; and cash flow challenges.

CPAB then reviewed the audit files of 11 of these companies varying in size and sector, and looked at: (i) how going concern risk was addressed in client acceptance or continuance; (ii) how the audit team evaluated management’s assessment of going concern; (iii) communication with those charged with governance; (iv) consistency of the going concern evaluation with other parts of the audit file including auditing accounting estimates like goodwill or intangible asset impairment.

Overall, the CPAB found that every file reviewed complied with the Canadian auditing standard for going concern. However, the CPAB had a number of observations and identified areas worthy of continued discussion. For further details refer to the CPAB Exchange bulletin of January 2020.

In 2020, the CPAB plans to continue to seek Canadian perspectives on this issue and has organized a working group to carry out further work.


Other developments

January 2020

In January 2020, the CPAB is­sued an Ex­change Bul­letin sum­ma­riz­ing the re­sults of their work to date on the issue of Going Concern and advising stakeholders of CPAB’s plans to carry out further work during 2020 on this issue.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.