The concept of going concern is a fundamental principle for preparation of financial statements. As per the going concern basis of accounting, an entity records assets and liabilities in a manner that it will be able to realise its assets and discharge its liabilities in the normal course of business. As per the International Standard on Auditing (ISA) 570 (Revised), Going Concern, auditors are required to obtain sufficient appropriate audit evidence regarding, and conclude on the appropriateness of management’s use of the going concern basis of accounting in the preparation of the financial statements. Based on this audit evidence, the auditors are required to conclude whether a material uncertainty exists about an entity’s ability to continue as a going concern. Recently, the International Auditing and Assurance Standards Board (IAASB) issued an exposure draft of ISA 570 (Revised 202X) (ED-570) which aims to enhance the transparency with respect to the auditor’s responsibilities and work related to going concern. The ED-570 augments the risk assessment procedures, draws on a wider range of information (including external or third-party information) to obtain sufficient and appropriate audit evidence, enhances the use of professional skepticism and requires more transparency and communication. This edition of Accounting and Auditing Update (AAU) contains an article on this topic which highlights the proposed revisions to the auditing standard on going concern.

Over the years, sustainable finance has become a prominent initiative and it is the term used to describe financing and investment decisions that consider Environmental, Social, and Governance (ESG) issues. Considering that investors and asset managers are key pillars in the sustainable finance structure, the Securities and Exchange Board of India (SEBI) constituted an ESG Advisory Committee (EAC) in 2022 which, inter alia, provided recommendations for expanding the disclosure norms for ESG funds through public consultations. Subsequently, the SEBI (Mutual Funds) Regulations, 1996 (MF Regulations) were amended on 27 June 2023 to inter-alia specify that the funds under ESG schemes should be invested in the manner as specified by SEBI periodically. Accordingly, on 20 July 2023, SEBI issued a circular for mutual funds, implementing some key measures to facilitate green financing with a thrust on enhanced disclosures and mitigation of green washing risk (circular on ESG investing). Our second article aims to provide an overview of the recent developments relating to ESG investing.

As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internally.

We would be delighted to receive feedback/suggestions from you on the topics we should cover in the forthcoming editions of the AAU.

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