Leigh Harrison outlines the practical issues, for both the auditor and management, that may arise when applying the revised going concern standard. As auditors rapidly approach the start of ‘busy season’ and management near the end of the financial year, one of the biggest challenges that will impact on both the auditor and management are the changes to the going concern auditing standard. The revised standard, applicable for periods beginning on or after 15 December 2019, increases the auditor’s work effort, which includes expanded risk assessment procedures over going concern, increased scrutiny over management’s going concern assessment and enhanced reporting requirements in the auditor’s report. The directors’ responsibility for going concern is seated in company law, with the duty to prepare financial statements that give a true and fair view, in accordance with the applicable financial reporting framework. The accounting standards require the preparation of a going concern assessment, taking into account all available information about the future, for a period of at least 12 months. The financial statements are prepared on a going concern basis unless management determines that they intend to liquidate the entity, cease trading, or have no realistic alternative but to do so. Complexities in the current year The world is now a very different place than it was at the start of 2020. In a matter of months, COVID-19 swept across the globe. The pandemic subsequently led to travel restrictions, business closures, cancelled events, and lockdowns. Governments responded with a range of financial supports in an attempt to support jobs and businesses. During this time, management will have had to revisit their business plans, forecasts and cash flows in response to the ever-changing economic environment. Meanwhile, calls for better climate change reporting and the end to the Brexit transition period compound the complexity. Practical issues for management Although the directors are ultimately responsible for the assessment of going concern, in many cases, they may delegate the preparation of the assessment to management. The directors will need to possess the skills and knowledge to understand and challenge the assessment prepared by management and have a robust governance, oversight and approval process to challenge and validate management’s assessment. For management in smaller businesses, where an assessment of going concern may not have been formally prepared and documented in previous years, the requirement in the current year is likely to be a step-change. In some ways, the continually changing economic environment in which businesses currently operate will have prepared management for the preparation of their going concern assessment as they continuously re-assess the impact of change on their business. Ahead of year-end, management should engage with their auditor to agree on the expected audit deliverables and ensure that they have the processes in place and resources required to perform the assessment. Remote working may add further complications as inputs required for the assessment are likely to be prepared across the finance function, and team members may be on furlough. Management will need to factor in additional time for scenarios where, for example, additional funding is required or waivers of covenants must be negotiated and agreed, as credit approval may be delayed due to the impact of bank staff working remotely. Management will need to have specific processes in place, including a risk assessment process to identify, assess and address risks facing the business relating to going concern. Management will also need to explain to the auditor how they measure and review financial performance, use their information systems to identify and capture events or conditions that may impact the going concern assessment, and how management identified the relevant method, data and assumptions used within their going concern assessment. The assessment must be prepared and documented by management in all cases and should be tailored and right-sized for the business. For some non-complex businesses with high levels of cash reserves, management’s assessment may not require detailed cash flow forecasts. A memorandum detailing management’s analysis and considerations may suffice. In contrast, more complex entities will require a thorough assessment of current and future risks, forecasted cash flows, consideration of current funding available, and the identification and assessment of plans to address identified risks. The area management must consider when preparing their assessment is wide-ranging and includes risks facing the business (both internal and external, current and future), the business environment, developments in the industry, and future prospective plans. The purpose of the assessment is to determine whether certain events or conditions may cast significant doubt on going concern and whether those events result in a material uncertainty to exist. In preparing and documenting their assessment of going concern, the auditor might expect to see the following: Analysis of the core operations of the business as they relate to going concern, including the business model, types of investments or disposals planned, how the business is financed and so on. Analysis of the current financial position compared to the prior year, considering key metrics such as net current assets/liabilities, operating cash inflow/outflow for the year-to-date, funding arrangements in place and related covenants, and so on. Analysis of the results post-year-end compared to the prior year, including revenue, profits, and status of funding. Details of events or conditions identified by management that may cast significant doubt on going concern and may affect the future performance of the business. For example, changes in demand for products or liquidity challenges. Where events or conditions are identified by management, management should document their plans to address those events. When management consider that a detailed assessment is required, they should document the model, assumptions and source of data used in their assessment. Management may find it useful to prepare a sensitivity analysis, where there are several potential assumptions or actions. The assumptions and data used in the assessment of going concern must be consistent with those used elsewhere in the business – when considering the valuation of goodwill, for example. Practical issues for the auditor In the planning phase, the auditor will need to ensure that the team has the resources and experience necessary to perform the required procedures. Where the new requirements present a step-change for clients, it will be particularly important for the auditor to engage early. Doing so will help clients better understand the extent of audit evidence expected, and the level of input that will be required from management throughout the audit process to assist the auditor in their enquiries and procedures. There is no prescribed methodology for management to use when preparing their assessment of going concern. In scenarios where management has determined that detailed forecasts and cash flows are not required, the auditor will need to use their professional judgement to determine whether they consider the assessment to be appropriately detailed. This may lead to difficult conversations. At the other end of the scale, management’s assessment may include, for example, detailed forecasted cash flows that are built on complex models with multiple assumptions and sources of data. In these situations, the auditor will need to obtain a detailed understanding of the model, and careful consideration will be required to determine which assumptions and sources of data are critical to the assessment. Professional judgement will be needed when designing the required audit procedures, which may include evaluating the design, implementation, and testing management’s controls over the process for preparing the assessment. For 2020 year-ends, more entities will likely face liquidity issues given the continuing impact of COVID-19 on business. As such, management’s plans may include seeking reliance on group support. Auditors of components within groups will need to get a ‘big picture’ view of the group’s ability to provide the support required. More than ever, there is a greater need for the auditor to maintain their professional scepticism, challenge management throughout the audit process, and evidence that on the audit file. Conclusion For some businesses, the implementation of the revised going concern standard will be a step-change that will result in changes to processes, controls, oversight arrangements and increased management input to prepare management’s assessment of going concern. For the auditor, greater audit effort will be required, resulting in additional time input throughout the audit process. The auditor will need to exercise their professional judgement when evaluating management’s assessment, identifying the critical assumptions and data, considering whether sufficient appropriate audit evidence has been obtained, and concluding on going concern in the audit report.  Leigh Harrison is Director at KPMG’s Department of Professional Practice.

When it comes to sustainability, the problem is not that there are no standards. Rather, there are too many of them, writes Dr Brian Keegan. In the current abnormal news cycle, something has to be really strange to stand out. One such item in October was a report that UK authorities were to permit the opening of a coal mine in the north-east of England. This runs counter to most of the prevailing trends. True, the rehabilitation of coal was an element of Donald Trump’s first presidential campaign, but that has not prevented its decline in the US in favour of cleaner natural gas and more sustainable sources like wind and solar. Coal from this new British mine is not for energy production. It is apparently to be used in the manufacture of steel. It is also being used in the manufacture of jobs for the impoverished north-east. Job creation tends to rattle sustainability priorities and seems to have been the consideration that swayed the local council into granting permission. The incident does highlight, however, the elusiveness of sustainability because “Decent Work and Economic Growth” is Goal 8 of the 17 sustainability goals promoted by the United Nations. While these goals have garnered considerable traction in the sustainability debate, having 17 goals impedes progress because, in practice, the goals can be contradictory. Goal 13, for example, is “Climate Action”, which is at right angles to opening coal mines in some quarters. This vagueness has conflated the sustainability debate with the already nebulous concept of corporate social responsibility. Corporate social responsibility should be looked upon with suspicion. All too often, HR initiatives to boost staff morale, marketing initiatives claiming green credentials for a particular product or service, or even support for the pet charity of the chief executive are folded in under an ersatz comfort blanket of social responsibility. Claiming sustainable practices or having corporate social responsibility champions won’t cut it. There has to be a concerted drive to come up with broadly acceptable standards to measure genuine corporate progress on sustainability issues. The current problem is not that there are no standards, but rather, that there are too many of them. The current custodians of standards- and ethics-setting, the International Federation of Accountants (IFAC), recently proposed that a new sustainability standards board be established, which would exist alongside the IASB under the IFRS Foundation. This new sustainability standards board should pull together existing expertise and the work of some existing sustainability reporting initiatives. The resulting framework could then be passed to the International Audit and Accounting Standards Board to develop the best assurance processes. This IFAC initiative differs from many other governance initiatives. Too often in the past, ‘solutions’ were provided, for which there was no demand. One of the legacies of this pandemic will be a greater awareness of sustainable practices.  There is demand from investors for comparable and dependable data on environmental, social and governance factors and this form of reporting offers a value-added opportunity for accountants. On the other hand, the initiative carries the risk of becoming hijacked by environmental activism, leading to reporting requirements that would fail a cost/benefit analysis within the SME sector. Earlier this year, Harvard Business Review suggested that the chief financial officer should become the most prominent climate activist in their organisation. There is still some distance to go before this becomes a reality, but in an era when western governments are contemplating opening coal mines, nothing can be ruled out. Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

Welcome to a new edition of Accountancy Ireland, the last in what has been an extraordinarily difficult year for most. The best-laid plans made last December are by now  unrecognisable after months spent adapting to shifting realities. Chartered Accountants Ireland started the year with the presumption that Brexit would be the main issue for members in their external environment. Although a global pandemic overshadowed it, the Institute has worked throughout the year to support members on Brexit-related matters and to advocate on their behalf. As we approach the end of the Brexit transition period, our events and updates have continued. We recently opened registration for the third intake of students for our Certificate in Customs and Trade and, in the final quarter of the year, launched a new Brexit Digest e-newsletter full of practical guidance for businesses in Ireland and Northern Ireland. In recognition of Chartered Accountants’ critical role in driving the sustainability agenda, the Institute also recently published the Sustainability for Accountants guide, along with a Sustainability Hub on our website. The fight against climate change is now a corporate imperative. Moving our gaze west, Americans have gone to the polls and the New Year will bring a new administration. In this edition, we look ahead to what the next four years might bring. Change is also afoot in global tax, and Accountancy Ireland looks at the OECD’s proposed reform of the global digital and corporation tax system. Closer to home again, the Institute has endeavoured to respond quickly and effectively to meet the needs of members during the COVID-19 pandemic. Our primary focus has been on providing timely, helpful and practical support to members as they serve their clients and steer their organisations. As an educator, we are acutely aware of the challenges facing students during these months. Our education provision has evolved dramatically over the last year and our CAP1, CAP2 and FAE programmes successfully launched on our new online education platform. Producing the highest-calibre finance professionals is more important than ever for our economy. This festive season will be very different, but I’d like to wish members and students a peaceful, safe and enjoyable Christmas. For those who find themselves in particular difficulty, remember that assistance is available from CA Support. You can find details on our website. Thank you to the committees, volunteers, management and staff of the Institute for their efforts during 2020. I hope that we can make a return to a more normal way of life in the New Year. Paul Henry President

Irish stories this week cover the Revenue Chairman’s appearance before the Public Accounts Committee. The Chairman responded to questions relating to bogus self-employment claims, the tone of Revenue engagement and difficulties facing the self-employed and SME sector in meeting their tax obligations due to COVID-19. In UK developments, HMRC has set out its policy on the tax treatment of virtual Christmas parties, and read HMRC’s updates including COVID-19 compliance checks. While in international tax, the OECD published a report on the activities and achievements in the OECD’s international tax agenda for the G20 leaders.       Ireland Revenue chairman, Niall Cody, appeared before the Public Accounts Committee last week, responding to questions on bogus self-employment claims, the tone of Revenue engagement and the difficulties facing the self-employed and SME sector in meeting their tax obligations due to COVID-19; The CCAB-I made further representations to the Minister for Finance highlighting concerns on the impact of the transfer pricing provisions contained in Finance Bill 2020, which were not abated in Committee Stage Amendments; UK Read about HMRC’s policy on the tax treatment of Christmas parties and what to do if you pay employees early in December; Key messages from recent HMRC meetings are available including important updates on compliance work in respect of COVID-19 supports; and   International The OECD published a report outlining the activities and achievements in the OECD’s international tax agenda for the G20 leaders.

Revenue confirmed the Covid Restrictions Support Scheme (CRSS) e-Registration facility in ROS opened at the start of this week. Eligible businesses, or tax agents acting on their behalf, are encouraged to register for the scheme now. Revenue confirmed that the CRSS is a separate tax head for registration purposes so agents will need to organise an agent link form. Up to date tax clearance is also required for registration.  Updated guidance on the CRSS also issued on Tuesday.  To register for CRSS, in addition to having tax clearance, an eligible business must:make a declaration that it meets the eligibility criteria for the scheme, and provide the information listed in paragraph 3.1 of the CRSS guidelines.Turnover details provided as part of the registration process must be consistent with the information included in the relevant tax returns of the business. This will be validated against the information already held on Revenue systems. The updated guidance confirms that a partnership can be registered for CRSS by the precedent partner, on behalf of the partnership. The precedent partner will need to register for the CRSS under the tax reference number of the partnership trade. Registration is the first step for a business in accessing the scheme. The next step is making a claim; the claims portal will be available in mid-November.The Revenue press release provides further details on the CRSS registration facility. 

Irish stories this week cover the publication of TWSS employers on the Revenue website and the reduced VAT rate for the tourism and hospitality sector, as provided for in Budget 2021, is now in effect. In UK developments, the UK Government extended the furlough scheme to March and increased the Self-Employed Income Support Scheme. While in international tax, the European Commission has extended the relief from customs duties and VAT on the importation of personal protective equipment and medical equipment from outside the EU and is proposing further VAT reliefs for hospitals and medical practitioners. IrelandRevenue published the names and addresses of employers who availed of the TWSS last week;The VAT rate for the tourism and hospitality sector reduced from 13.5 percent to 9 percent on 1 November;UK The UK Government has just announced that workers across the United Kingdom will benefit from increased support with a five-month extension of the furlough scheme into Spring 2021. The Coronavirus Job Retention Scheme (CJRS) will now run until the end of March with employees receiving 80 percent of their current salary for hours not worked.  Similarly, support for workers through the Self-Employment Income Support Scheme (SEISS) will be increased, with the third grant covering November to January calculated at 80 percent of average trading profits, up to a maximum of £7,500.  For further details see here. InternationalThe European Commission announced an extension to the relief from customs duties and VAT on the importation of PPE and medical equipment from Third Countries. A new proposal for relief from VAT on vaccines and testing kits for COVID-19 for hospitals and medical practitioners is also included.   

Our top Irish stories this week include a review of the provisions contained in Finance Bill 2020 for the COVID Restrictions Support Scheme and the warehousing of income tax debt. In the UK, the UK Government announced that the Job Support Scheme will open on 1 November and run for six months, until 30 April.  While in international tax, the European Commission is seeking feedback on a new initiative to review the VAT rules for financial and insurance services. IrelandFinance Bill 2020 sets out the provisions for the  COVID Restrictions Support Scheme; The provisions relating to the warehousing of income tax debt are also considered;UK The UK Government announced that the Job Support Scheme opens on 1 November; HMRC launched a campaign to contact taxpayers who have ceased to trade and claimed the SEISS grant; andInternationalThe European Commission is seeking feedback on a new initiative to review the VAT rules for financial and insurance services.

Revenue confirmed that the Debt Warehousing Scheme remains available to businesses experiencing cashflow or trading difficulties as a result of COVID-19 restrictions, including those more recently announced. The Information Booklet on the Tax Debt Warehousing Scheme has also been updated providing details for businesses that are closed again due to the re-imposition of restrictions. In a press release, Revenue confirmed the availability of the scheme for those most recently affected by public health restrictions. It is noted that the terms of the scheme remain unchanged in the sense that access is automatic for SMEs and all relevant tax returns for the restricted trading period must be filed. The new paragraph 4.10 of the Information Booklet provides: “In these circumstances the trade is deemed to be still subject to the restrictions provided for in the regulations under sections 5 and 31A Health Act 1947 until it has re-opened again. This means that VAT and PAYE (Employer) debts for such businesses can continue to be warehoused in respect of the extended restricted period(s)”. Additional examples have also been included in the booklet.

Conal Kennedy, Head of Practice Consulting, writes: As we start into October, the end of the year looms, and we begin to look back at 2020 and focus more on 2021. The COVID-19 crisis has been the overwhelming story of the year. Very few businesses or practices have done better out of the crisis but everyone has done something different. What has been brought home to firms is the value of being prepared. Those firms that had invested heavily in technology were the best placed to rebound. That said, what has struck me most is the resilience and resourcefulness of our members in practice. Members pivoted from business as usual, to remote working, and on to a blend of remote and socially distanced working. Members moved quickly at each stage to assess the situation, gather information and help their clients, first to secure cash flow, then to arrange state benefits, then to help with those structural changes that are necessary to meet the demands of the new normal. As this continued, the regular work of compliance continued. What turn is next from the crisis remains to be seen. As of going to print, governments on both sides of the border are contemplating reintroducing measures to control the resurgence of the virus. In the meantime, a hard Brexit is threatening. What is certain is that more change is coming and practitioners will have to respond again. In the weeks up to 8th July, we carried out the All-Member Survey 2020. We asked a range of questions, including members’ engagement with and attitude to the Institute, and their responses to the COVID-19 crisis. See Brendan O’Hora’s article in this month’s Accountancy Ireland, where he provides an overview of the results of the survey. Specific points relating to practice were that practitioners have been disproportionately impacted by the crisis, compared to members generally. 93% of members in practice considered their firms were stable or growing at the start of the year, but 63% changed their description post-COVID to being somewhat impacted or struggling. In the Republic of Ireland, 47% of practising members said that they could charge clients usually or always for work done to assist them in dealing with the crisis, and 35% said that they could charge for this work sometimes. In Northern Ireland, these percentages were lower at 39% and 33% respectively. Practitioners were generally pleased with the Institute’s response to the crisis, particularly the supports provided through the COVID Hub and the Webinars series. Compared with members in general, practising members are generally more engaged with the Institute and see it as more relevant to them. We were pleased to see a 7% drop in those members in practice who stated that they were dissatisfied with the Institute since the last survey in 2018. The Institute has already used the results of the survey to inform the issues that we should raise with government as a matter of priority, and it has also informed our continuing engagement with our members to determine what practical steps we should take to improve the experience of members in practice. At this stage, members in practice have told us that they are keen to generate and develop new work. As always, referrals are the best source of new work, and these are not particularly impacted by the crisis, in that if you do good work for clients, they will let their contacts know. However, practitioners have a natural desire to try to accelerate this process by forging and renewing personal contacts in their networks. As we go through lockdown and socially distancing measures, this is more difficult. Many members are most comfortable if they can visit a client or contact and meet personally with them in their own physical space, and they feel that conversation and ideas flow most readily in this environment. In this instance, it makes sense, so far as is safe and reasonable to create these opportunities for physical visits, even if this process needs to be more structured and is less spontaneous than before. Other members are now reaping the rewards of early efforts to digitalise their marketing efforts, especially in the social media space, that, if anything has taken on more importance in this crisis. If you have not developed a significant social media presence before now, it might be in order to do this now. One way or another, you should be planning ahead, and considering how you will finish out this year and what plans you should put in place for 2021. For our part, the Institute will take member feedback on board as we plan our services in the year ahead, so we continue to keep pace with the needs of members in practice.

Revenue extended the deadline from 30 September to 31 October for taxpayers wishing to enter into a phased payment arrangement (PPA) to avail of the reduced interest rate (3 percent) on outstanding ‘non-COVID-19’ tax debts. Chartered Accountants Ireland requested an extension to the deadline in a letter to the Revenue chairman, Niall Cody. As confirmed in a Revenue eBrief, the extended deadline allows for taxpayers and their accountants to finalise a PPA covering non-COVID-19 tax debt in respect of liabilities due by 30 September 2020. Revenue confirmed the extension to the deadline in a press release on Wednesday evening, which noted the challenges that taxpayers and their agents are experiencing at this time. Over €46 million of tax debt is now covered by a PPA to which the reduced interest rate applies. Collector General, Joe Howley …” strongly encouraged the uptake of this opportunity and of the extended deadline that now applies”. Where a PPA is in place, a business will qualify for tax clearance, which may allow access to the EWSS and other schemes. Revenue confirmed to Chartered Accountants Ireland that a reduced interest rate PPA would be available for a 2019 income tax liability, where preliminary tax was underpaid in 2019. As the due date for the full liability reverts to the date the preliminary tax was due (i.e. 31 October 2019) the liability is due before 30 September 2020. Accrued interest at the full rate from 31 October 2019 to the date of the PPA applies in such a scenario. The Revenue information booklet provides detailed information on the reduced interest rate on non-COVID-19 tax debt. 

The TWSS reconciliation process and the requirement to report the subsidy paid amount to Revenue before 31 October 2020 features as our top Irish story this week. Revenue has also provided details on how payments received under the TWSS and PUP will be taxed.  In the UK, was the Chancellor’s Winter Economy Plan a trick or treat, and what’s new with HMRC? While in international tax, the OECD has published a report on BEPS Action 13 Country by Country Reporting.      IrelandTWSS reconciliation process – employers are required to report the actual subsidy paid to employees to Revenue before 31 October 2020; A Revenue press release sets out details on how payments received under the TWSS and PUP will be taxed;UK Was the Chancellor’s Winter Economy Plan a trick or treat? Read more on the tax measures announced last week; What’s new with HMRC? We set out some takeaways from a recent meeting; andInternationalProgress on transparency, the OECD has published a report on the BEPS Action 13 Country by Country Reporting. 

Suzie Arbuthnot ACA, the winner of BBC’s Best Home Cook, discusses life as a parent, entrepreneur, and TV presenter.Earlier this year, you were crowned BBC’s Best Home Cook, how did that come about?Back in 2017, I entered the Great British Bake Off. I was first reserve and was devastated when I didn’t get called up. One of my friends told me to enter this other food programme, and so I did. A few days later, I had a phone interview and then a face-to-face meeting in Northern Ireland, where I had to make a savoury and a sweet dish. I was then flown to London to replicate the three stages you see on the show and, as they say, the rest is history!You recorded the show while setting up your own business. What was that experience like?I became self-employed on 1 February 2019 and I flew to London at the very beginning of March to start filming Best Home Cook. I was completely stressed because I wasn’t bringing in an income, but my husband said: “You have worked so hard for this opportunity, you can’t give up now!” So, having won the title and trophy plate, I had to return to normal life and not tell a soul. It was an agonising nine months. I set up my own practice by following the straightforward steps set by Chartered Accountants Ireland. I was extremely fortunate that my old firm (PGR Accountants, Belfast) referred a piece of work to me, and that got me started.What would you describe as your greatest challenge or achievement to date?I used to say: “finally qualifying as Chartered Accountant”, as it took me eight years. I never gave up, and I knew I could do it. I was able to have my family, have my children, and just enjoy life. I don’t regret a moment of it at all. However, I think winning a UK-wide cooking competition and now presenting my own food-focused TV show, Suzie Lee’s Home Cook Heroes, is pretty amazing!What’s the most valuable lesson you’ve learned?Have faith in yourself in whatever you do, as others are quick to knock you down. This has been true in all areas of my life, so be kind to everyone you meet, treat them the way you would like to be treated, and have no regrets.What do we most need in this world?We need to learn how to switch off. I am a huge culprit, but we are too connected these days – attached to our phones, tablets and laptops. The art of social interaction is starting to wane right in front of our eyes, and it’s all down to our devices.How do you recharge?I love keeping busy, but I get my energy from spending time with family, cooking, going to the gym, playing hockey for Lisnagarvey Hockey Club, and singing with Lisburn Harmony Ladies Choir.