The Going Concern Hub: where to start
26 June 2020: ICAEW has compiled a number of resources around going concern to support members in business and practice during these challenging times. Here are some links to start off with.
There is a common misconception that going concern is all about compliance. It’s actually the fundamental bedrock to accounting work all year round, from cash management and forecasting to strategic planning and auditing. Understanding going concern can help directors and investors make better decisions.
In the current climate, understanding risks to going concern is more important than ever. As businesses struggle with cashflows and stakeholders look to assess how viable and resilient organisations are understanding going concern issues will help with navigating the storm.
ICAEW has created the Going Concern Hub in order to support members and their clients in understand and plan for risks to going concern. It is broken into five sections, spanning everything from day-to-day business operations to audit. Here are some highlights from each section.
Managing and forecasting cash
Cashflow and financial management is crucial at the best of times, but it is imperative to get it right in the current climate as businesses face prolonged periods with reduced revenues. For financial controllers and management accountants within finance teams, a good place to start is How to improve your financial management.
Directors have a responsibility to oversee whether the organisation is a going concern. That the organisation is an ongoing entity is the underlying principle of all strategic thinking and underpins director’s duties. In the pandemic, businesses need strong financial leadership. Here’s How CFOs can help businesses emerge from the crisis.
Preparing financial statements
As financial statements are typically prepared on the assumption that a business is a going concern, it’s important for accountants to understand what the implications are as a result of COVID-19. In that respect, it’s important that accountants understand the various responsibilities and considerations when preparing statements. Start with Coronavirus: Going concern considerations – a guide for FRS 102 preparers.
Auditing going concern
Auditors need to test whether the use of the going concern basis is appropriate for an entity’s financial statements. Where COVID-19 has caused such upheaval across the board, auditors have some crucial questions to consider for their testing. Coronavirus: considering going concern explains what those questions are.
Understanding going concern
It’s important for investors and stakeholders to understand what it means if a business discloses a material uncertainty in relation to going concern. Coronavirus: understanding audit reports sets out what users of accounts need to know about audit opinions, including when there is a material uncertainty relating to going concern.