PCAOB takes on going concern | China Accounting Blog | Paul Gillis

PCAOB takes on going concern

I have written twice before about the issue of whether auditors should be challenging companies that use the VIE structure as to whether they are going concerns. The issue present is whether the substantial uncertainty that lawyers point out in the VIE structures rises to the level of substantial doubt that would lead auditors to give a going concern qualification.  One of the problems is that the auditing standards provide no clarity as to what constitutes substantial doubt. That may be about to change.

At the PCAOB Standing Advisory Group meeting tomorrow in Washington, Keith Wilson, PCAOB Deputy Chief Auditor, and Brian Degano, PCAOB Associate Chief Auditor are announcing that the PCAOB has a project to consider revision to the auditing standard on the auditor's evaluation of a company's ability to continue as a going concern. They observe that current PCAOB auditing standards (AU sec. 341) do not define the term "substantial doubt".  

The project does not appear to be specifically focused on the issues related to VIEs. Instead, the project team is considering:

How to enhance the auditor's evaluation process.

How to align the auditing standard with the respective accounting standards.

How to enhance the usefulness of the auditor's communication regarding the going concern uncertainty.

This is a timely project for the PCAOB, and promises to provide much needed guidance to the auditors of U.S. listed Chinese companies. 

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