For example, the auditor should consider the adequacy of support regarding the ability to obtain additional financing or the planned disposal of assets.
Information about such conditions or events is obtained from the application of auditing procedures planned and performed to achieve audit objectives that are related to management's assertions embodied in the financial statements being audited, as described in Auditing Standard No.
If the auditor concludes there is substantial doubt, he should consider  the adequacy of disclosure about the entity's possible inability to continue as a going concern for a reasonable period of time,  and include an explanatory paragraph following the opinion paragraph in his audit report to reflect his conclusion.
Due to new accounting standards effective for December year-ends, the future timeline that management must consider for cash flow needs has expanded to one year from the issuance date of the audited financials.
Exceptions[ edit ] Because the issuance of a going-concern opinion is feared to be a self-fulfilling prophecy, auditors may be reluctant to issue one.
Search for this discussion in three locations: They can help business review their internal risk management along with other internal controls.
The most critical reason that auditors might fail to issue a going-concern opinion, however, could be a fundamental misunderstanding of the assumption itself.
Threats to continued existence of any entity can only be eliminated with prospective plans and actions. Accounting[ edit ] This accounting principle assumes that, a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future.
While the act did codify as law the reporting requirements of SAS 59, it also made it more difficult for a plaintiff's attorneys to successfully pursue class-action litigation against auditors.
Downgraded opinions warrant your immediate attention. The going concern principle allows the company to defer some of its prepaid expenses until future accounting periods. The auditor should give particular attention to assumptions that are— Material to the prospective financial information.
A company remains a going concern when the sale of assets does not impair its ability to continue operation, such as the closure of a small branch office that reassigns the employees to other departments within the company. Post a comment and share your experiences in planning for going concern issues.
On the other hand, inappropriate use of the going concern assumption by an entity may cause the auditor to issue an adverse opinion on the financial statements. Companies that are a going concern may defer reporting long-term assets until a more appropriate time, such as in an annual reportas opposed to quarterly earnings.
If a company acquires assets during a time of restructuring, it may plan to resell them later. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations.
the going concern basis of accounting, but rather under the liquidation basis of accounting in accordance with ASCmust have approved the plan before the issuance date Management should further assess its plans (that are probable of effective. going concern in the financial accounting and reporting literature, problems emerge in juxtaposition between management’s assertions and the auditor’s assessment.
Ellingsen, Pany, and Fagan () wrote. Jul 27, · Research firm Audit Analytics recently analyzed auditor opinions filed with the SEC as of May 31, that were qualified by an uncertainty regarding the going concern assumption (“going.
CPAs reconsider the “going concern” assumption every time they audit financial statements.
When the long-term viability of a borrower is doubtful, it may cause the CPA to issue a qualified audit opinion — or, worse, to withdraw from the job altogether. Going Concern: Are You Asking the Right Questions? admin. Sift Media. Recent statistics released by the SEC indicated that 20% of issuer’s financial statements were accompanied by audit reports with going concern exceptions in !
ASK: What are the effects of the economic downturn on the entity’s business? ASK: What are the. A going concern is a business that functions without the threat of audit committees and finance teams in determining whether it is appropriate to adopt the going concern basis for preparing financial statements and in making balanced, proportionate and clear disclosures.
elements that are particularly significant to overcoming the.Business plan going concern audit