Publication

3 February 2021

Going concern: recommendations to strengthen the financial reporting ecosystem

When a company collapses, all stakeholders are affected, from employees to investors, and it eventually erodes the public’s trust in financial markets.

This publication, with its counterpart on fraud, presents recommendations to strengthen the financial reporting ecosystem. This is especially topical after recent corporate failures, fraud cases and companies getting under pressure due to the ongoing COVID-19 pandemic. We thus re-examine the role of key parties to make the system more resilient: those within the company, external auditors, standard setters, legislators and public oversight authorities.

The system should become better at dealing with and communicating on issues with a company’s ability to continue as a ‘going concern’. Simply put, if it will remain in business for the next 12 months. With this aim, we propose the following recommendations:

  • broaden companies’ work effort
  • mandate disclosure on companies’ risk management systems on going concern and expand the auditor’s involvement
  • mandate going concern disclosure even if no uncertainties
  • change in mindset, transparency and communication
  • mandate an audit committee in each public interest entity
  • clarify and harmonise the period for going concern assessment
  • broaden auditors’ area of consideration and work effort
  • make early warning mechanisms for auditors effective

We also invite relevant parties to explore whether and, if so, how assessing companies’ longer-term viability and resilience, and interconnecting of financial and non-financial information could contribute to this aim.

We call for a joint effort of key parties to strengthen the ecosystem. To this end, we ask you to send your thoughts and opinions on our recommendations to [email protected]. The original deadline for submissions – 30 April 2021 – has been extended to 30 May 2021.

Summary:

Related content

Consultation responseIASB’s third agenda consultation, EFRAG’s draft comment letter and own proactive research agenda consultation

13 July 2021

EventA Global Solution for Auditing Less Complex Entities

19 November 2021

UpdateAudit Policy

7 October 2021

NewsReporting Beyond the Financials: Sustainability on the Books

24 September 2021

Team memberChara Georgiou

17 September 2021

UpdateAudit Policy

2 September 2021

Consultation responseIAASB’s survey consultation: work plan for 2022‒2023

25 August 2021

NewsA 360 view on Sustainable Corporate Governance

14 July 2021

UpdateAudit Policy

12 July 2021

Consultation responseUK government BEIS department’s consultation on restoring trust in audit and corporate governance

8 July 2021

EventSustainable Corporate Governance – A fireside chat with MEP Heidi Hautala

21 June 2021

UpdateAudit Policy

28 May 2021

PodcastThe shift to sustainability: A CFO’s journey

20 May 2021

PublicationResponses to Fraud and Going concern: recommendations to strengthen the financial reporting ecosystem

17 May 2021

Consultation responseIESBA’s proposed revisions to the definitions of listed entity and public interest entity in the...

5 May 2021

EventWorking Together for the planet: Audit & Assurance of sustainability Information

29 April 2021

NewsAccountancy Europe: Future-proofing tax to make it green, digital and fair

26 April 2021

NewsAccountancy Europe: Toughen the financial reporting ecosystem against fraud

23 April 2021

PodcastAn inside look into the BEIS consultation

23 April 2021

UpdateAudit Policy

14 April 2021

NewsIn-depth: what is at stake in EU plans for sustainable corporate governance?

9 April 2021

Sign up for our newsletter

* indicates required
Would you like to subscribe to our newsletter?
On which topics would you like to receive news?