Going concern guidance for compilation engagements
Our previous article on “Going Concern Guidance for Audit Engagements” discussed the impact of the current health and economic crisis on an auditor’s evaluation of an entity’s ability to continue as a going concern. It also discussed the required accounting and disclosure requirements for all types of for-profit and nonprofit entities found in FASB ASC 205-40, Presentation of Financial Statements – Going Concern. This blog post focuses on the going concern considerations related to compilation engagements.
For compilation engagements, the relevant going concern guidance is contained in AR-C 80A.A20. Accountants are not required to perform procedures to verify information in a compilation engagement, but accountants may be aware that information provided by management is incorrect or incomplete. If the accountant becomes aware that there are uncertainties about the ability of the entity to continue as a going concern that are not disclosed, he or she may suggest that additional disclosures be added so that the financial statements are not misleading. If disclosures are not added, the accountant may need to determine whether withdrawal from the engagement is necessary. However, AR-C 80A.A21 indicates that disclosure of the uncertainty is not required if the financial statements omit substantially all disclosures.
Although not required by standards, an emphasis-of-matter or other-matter paragraph may be included in the accountant's compilation report to call attention to the uncertainty of the entity's ability to continue as a going concern for a reasonable period of time.