by John McCarthy Consulting Ltd. | Jul 3, 2026 | Blog, News
This is part two of our blog on Going Concern for SMEs. Last week we highlighted the fact that the ACCA have recently (April 2026) issued a Technical Factsheet to assist small and medium entities and their advisor firms to comply with the requirements of FRS 102. The Factsheet is called ‘Going concern for SMEs’.
The Factsheet provides some examples of going concern scenarios to consider along with a very useful table of with a non-exhaustive list of examples of material uncertainties related to going concern for Directors and their advisers to consider:
| Issue |
Reason why it is a going concern |
| The balance sheet shows a net current liabilities (or net liabilities) position |
This indicates the entity may be unable to meet debts as they fall due |
| The bank does not renew borrowing facilities |
A lack of cash makes it difficult for a company to pay suppliers, employees and other liabilities as they fall due |
| The company has breached a loan agreement |
Breaches of a loan agreement may trigger immediate repayment, hence placing additional pressure on the cash flow of the business |
| Staff are not paid on time |
This indicates a lack of working capital and potential loss of employee goodwill |
| Legal claims have been brought against the entity |
If successful, these may result in significant cash outflows, thus placing additional pressure on working capital |
| Loss of key staff |
This may make it difficult for the entity to trade |
| Changes in laws and regulations |
Such changes may make it costlier for the business to comply, and the costs of compliance may be more than the company can realistically afford |
| Changes in laws and regulations |
Such changes may make it costlier for the business to comply, and the costs of compliance may be more than the company can realistically afford |
| Failure to obtain credit from suppliers |
This indicates a bad credit rating, which usually arises from a failure to pay liabilities |
| Missing payments to HMRC or an equivalent taxation authority |
Payments to HMRC or an alternative tax authority should be prioritised, and any missed payments may indicate the company has a lack of working capital |
| Negative cash flows |
This indicates overtrading |
All the templates on our website have had a refresh as of June 2026 and the letters of engagement have had a new paragraph added for the potential use of artificial intelligence and machine learning on client assignments along with auto enrolment for payroll assignments. There is a bulk discount (five templates for the price of four) for purchases of five or more templates when purchased in a single transaction.
If you need an up-to-date engagement letter, there is a search bar near the bottom of our home page (www.jmcc.ie) to quickly look up the item you need. More details see here.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor our training and brainstorming sessions to suit each firm’s unique requirements.
Publications:
by John McCarthy Consulting Ltd. | Jul 3, 2026 | Blog, News
The ACCA have recently (April 2026) issued a Technical Factsheet to assist small and medium entities and their advisor firms to comply with the requirements of FRS 102. The Factsheet is called ‘Going concern for SMEs’.
The Financial Reporting Council (FRC) have already issued their own guidance on going concern but it does not cater for small and micro-entities. So the ACCA are filling the gap.
The Factsheet points out that all companies (including those that are audit exempt) are obliged to carry out an assessment of their ability to continue in operational existence for the foreseeable future. The term ‘foreseeable future’ is not defined in accounting standards but is taken to mean at least (but not limited to) 12 months from the date of approval of the financial statements.
There are only two circumstances in which an entity does not prepare financial statements on a going concern basis:
When carrying out its assessment of going concern, management is required to take into account all relevant facts and circumstances at the date of approval of the financial statements.
‘Relevant facts and circumstances’ may need careful thought, for example these three important criteria (which are not a complete list of variables to consider):
- Availability of cash
- State of the industry
- Renewal of borrowing facilities
Several other indicators will also be needed by Directors to make their going concern assessment including (bit not an exhaustive list):
- budgets and forecasts;
- interim management information (e.g. management accounts);
- likelihood of borrowing facilities (e.g. overdrafts) being renewed;
- current headroom with borrowing facilities;
- overall state of the market in which the company operates;
- potential impact of any ongoing litigation claims or potential outcome of contingent liabilities; and
- support available from a group (e.g. a parent entity).
More on this topic next week.
All the templates on our website have had a refresh as of June 2026 and the letters of engagement have had a new paragraph added for the potential use of artificial intelligence and machine learning on client assignments along with auto enrolment for payroll assignments. There is a bulk discount (five templates for the price of four) for purchases of five or more templates when purchased in a single transaction.
If you need an up-to-date engagement letter, there is a search bar near the bottom of our home page (www.jmcc.ie) to quickly look up the item you need. More details see here.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor our training and brainstorming sessions to suit each firm’s unique requirements.
Publications:
by John McCarthy Consulting Ltd. | Nov 16, 2025 | Blog, News
The Chartered Accountants Ireland last month filed its response to the FRC consultation about the draft Practice Note on the Audit of Less Complex Entities.
The PN is basically the updated version of the much loved PN 26 Guidance on Smaller Entity Audit Documentation which was withdrawn in 2016. The latest version still has the same hotel/restaurant case study example (Bulls Restaurant and Hotel) but with updated references to the latest ISAs and the latest technology.
While the Institute supports the development of additional guidance in principle as small and medium-sized practices need to be able to apply the ISA proportionately to the scale of their audit clients. The Institute prefers that the FRC would focus on the IAASB standard called the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE’), which is better customized for the needs or SME audit market.
Among other things, in its response, the Institute has called for:
- Better alignment/mapping to the underlying ISAs, which would aid ease of reference when navigating the ISAs;
- More guidance and examples on the calculation of performance materiality including how firms should document the rationale for calculations used and use of associated benchmarks to support calculation of performance materiality;
- Enhancements to the PN such as examples regarding:
- documentation of professional judgement;
- further guidance and examples regarding scope of the PN, and
- dealing with IT general controls (ITGCs) in an SME audit environment; and
- examples need to be more innovative and not merely focus on straightforward circumstances to ensure they are useful in practice.
The Institute also calls for better coordination between the ISAs and the PN because as paragraph 4 of the PN states, the PN does not contain commentary on all the requirements in the ISAs and reading it should not be seen as an alternative to reading the relevant ISAs in their entirety.
Ultimately this means that SME auditors, inspectors, and software providers would still have to follow over 1,000 pages of the full ISAs and have regard to another 64 pages of the PN.
The response also draws attention to the fact that only nine ISAs are referenced in detail in the PN which could result in inconsistent interpretations and confusion when practitioners are performing SME audits. It would be more helpful for regulators also if there were better cross-referencing as to where requirements are not relevant or where requirements are scalable for SME audits in the form of a mapping document. This would remove the need for practitioners to review the entire series of ISAs when performing SME audits
For audit cold file reviews and tailored training sessions explaining more about various topics like AML, Audit, FRS 102, please send a mail to john@jmcc.ie.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Jan 20, 2024 | Blog, News
Nearly a third of UK audits completed by small and mid-tier firms need ‘significant improvements’ after inspections by the Financial Reporting Council (FRC). The inspections were carried out for the year ended 31 March 2023 on 32 firms in total and reported by the Financial Reporting Council in late 2023.
These inspection results will be influential for Irish regulators like the Chartered Accountants Ireland, the CPA Ireland, the ACCA as well as the Irish Audit & Accounting Supervisory Authority when carrying out their inspections of Irish audit firms in 2024.
The Financial Reporting Council say that ‘disappointingly, many of our findings were in routine areas, such as
- the audit of journal entries;
- complying with archiving requirements;
- the audit of judgments and estimates (17% worse than in the previous report), and
- the audit of going concern.
Audit teams need to demonstrate a greater effort at robust professional scepticism when it comes to both the audit of judgments and estimates, and going concern.
The FRC also suggested audit teams refer to the FRC paper, What Makes a Good Audit.
We will continue with Part Two of this blog next week.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jan 20, 2024 | Blog, News
In last week’s blog ‘SME Audits Need to Improve’ we highlighted a recent report by the Financial Reporting Council (FRC) in the UK about their audit inspection findings for the year ended 31 March 2023. We continue with extracts from the report below.
Going concern was described as ‘an area of particular concern to audit firms’ by the FRC and it resulted in worse findings by 1% compared to the previous review.
Key findings of the review were:
- going concern included insufficient procedures to test cash flow forecasts;
- inadequate procedures to elevate the impact of loan covenants;
- insufficient procedures to assess the financing of debt; and
- There were ‘shortcomings in the reviews of audit work performed by engagement partners and/or engagement quality control reviewer’.
Other areas that led to such a high number of audits needing significant
improvement were:
- Revenue accuracy; and
- material accounting errors during an
Improvements recommended by the Financial Reporting Council include investment in:
- audit methodology;
- human resources,
- audit quality functions; and
- learning from mistakes made throughout their current auditing processes.
The FRC also suggested audit teams refer to the FRC paper, What Makes a Good Audit. See how to do this here.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
