Going Concern

Question 1

Going Concern

Answer 1

when assessed as a going concern that means the company is expected to thrive in the future
- management of public companies must assess a 12 month going concern

Question 2

Assessment of going concern

Answer 2

• management responsibility
• Financial: LT debt maturing with no cash to pay, not able to pay bills on time, negative cash flows
• Operating: loss of key customer, labor issues, supply issues
• Other: non-compliance with law, lawsuits ongoing

Question 3

Auditor responsibility on going concern

Answer 3

1) obtain evidence regarding the appropriateness of management assumption
2) conclude on evidence if uncertainty exists
3) report

Question 4

Conclusions (auditor)

Answer 4

• going concern is appropriate
• going concern is appropriate but material uncertainty exists
• going concern is not appropriate

Question 5

Auditor opinions

Answer 5

1) Adverse (going concern not appropriate and statements not appropriate) (going concern appropriate and uncertainty exists but not adequately disclosed)
2) Unmodified opinion with emphasis of matter paragraph (going concern not appropriate but statements are appropriate) (going concern appropriate and uncertainty exists with adequate disclosure)
3) Unmodified opinion (going concern appropriate with no uncertainity)