An organization undergoing significant going concern problems presents several challenges for the public accountant (PA) to consider. Discuss some of these.
What will be an ideal response?
Dealing with questions of going concern is difficult because auditors are forced to evaluate matters of
financial analysis, financial forecasting and business strategy. Management tends to be optimistic in their
estimates and are usually unwilling to give up and close their businesses without strong attempts to
survive. Auditors must attempt to bring a realistic view to accounting estimates, while realizing that they
are not likely as familiar as management with opportunities in the business.
Managers and auditors both view news of financial troubles in an audit report as a self-fulfilling prophecy
that causes bankruptcy. Even though the going concern issue may be fully disclosed in a note, the extra
credibility enjoyed by public accountants makes their emphasis of the matter in their audit report increase
the perception of risk of business failure. The mere fact that the report is a non-standard report raises
concerns as well. Nonetheless, auditors have an obligation to the users of financial statements to make
sure they are aware of the possibility of bankruptcy.
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During times of rising prices, which of the following is not an accurate statement?
A) Average costing will yield results that are between those of FIFO and LIFO. B) LIFO will result in a higher cost of goods sold than FIFO. C) FIFO will result in a higher net income than LIFO. D) LIFO will result in higher income taxes than FIFO.
The Securities and Exchange Commission (SEC) regulations are intended to ensure that investors receive fair disclosure of financial and nonfinancial information from privately held companies.?
Answer the following statement true (T) or false (F)
In the PSSP hierarchy of needs model, which level is illustrated by a Fidelity campaign on TV that proclaims its individual retirement account (IRA) is a sound investment for the future?
A. physiological needs B. safety needs C. social needs D. personal needs
Which of the following types of risks is normally uninsurable by private insurers?
A) personal risks B) property risks C) liability risks D) political risks