Describe the going concern issue and how auditors address it in an audit report.

Expert Solution

Going concern is one of the fundamental accounting assumptions. According to it the enterprises is normally viewed as a going concern, that is, as continuing in operation for the forseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations. General purpose financial statments are prepared on a going concern basis, that means unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so, the entity will go on.

IF the uncertainity exists, in such case auditor will require a proper disclosure in the financial statments about such uncertainity.

IF the financial statments have been prepared on a going concern bsisis but, in the auditor's judgement, management's use of the going concern assumption in the financial statments is inappropriate, the auditor shall express an adverse opinion, regardless of whether or not the financial statments include disclosure of the inappropriatness of management's use of the going concern assumption.

ekkarill92 answered 1 year ago

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