Article Writing Homework Help
Provide a 7 pages analysis while answering the following question: Going Concern Principle. Prepare this assignment according to the guidelines found in the APA Style Guide. An abstract is required.
Provide a 7 pages analysis while answering the following question: Going Concern Principle. Prepare this assignment according to the guidelines found in the APA Style Guide. An abstract is required. It is the stakeholders’ responsibility to see whether the firm has a future, whether it can sustain for a reasonable period of time (Lawson, 2009). This evaluation is done on the auditor’s relevant knowledge about current and past events (Lawson, 2009). This information could be gained through proper analysis of the financial statements (Lawson, 2009).
The auditor must consider all the available information during the course of the audit and raise any substantial doubt about the company’s going-concern assumption. In order, to clear their doubt they may also take the help of any additional information that might clear the doubt (AICPA, 2010).
If the auditor has considerable doubt about the going-concern stipulation for a reasonable period of time, then they may obtain the management’s plan to mitigate the risk of such a happening and also evaluate the plans in term of its viability (AICPA, 2010).
Once the auditor is certain of the doubts about the firm’s ability to perform as a going concern for a reasonable period then he may disclose the fact in his report along with an explanation for their decisions (AICPA, 2010).
The auditor does not have lay down any procedure or do any prior planning in order to evaluate the going-concern assumption (Roh, 2007). Rather they simply check for any issue that might raise questions on the going-concern ability during the course of audit (Roh, 2007). Such information generally includes the company’s ability to meet the current obligations and maturing obligations without having to adopt any strategy such as selling assets, etc (Roh, 2007).
These guidelines exempted the auditor of the responsibility of predicting future conditions and events. The auditor just relied on previous events and the current information.
Auditing and Credit Crunch
The world has recently gone through serious financial turmoil. In 2001, record-breaking 257 companies filed for bankruptcy (Venuti, 2009). Out of the 20 largest US companies, 12 filed for bankruptcy (Venuti, 2009). This was the first time in history. Historians and economists, call this recession one of the worst recessions the world has ever seen (Smart Pros Ltd, 2009). But what astonishes most is the auditor’s inability to warn the world before it all happened (Roh, 2007). After all, they were the ones who knew about the financial positions of any entity. their reports are the one that people refer to before investing. The 12 largest companies had received clearance from the audit committees about any doubt to their going-concern status, out of .the 257 companies that filed for bankruptcy only 48% had a paragraph to explain the doubt about their ability to continue as a going concern (Venuti, 2009).
