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Auditing - Essay Example

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Going concern is a concept “where the entity is assumed to continue in existence for the foreseeable future, the extent of which varies from entity to entity…
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Auditing

Download file to see previous pages... In fact seasonal interruption are routine and regular and even after such interruptions business continue in normal course and thus entities pursuing seasonal business may be called going concern despite periodic seasonal interruption
In this write up the issues relating auditors’ responsibility to assess the substantial doubt arising out of normal auditing procedures is considered in order to produce independent and effective reporting to the stakeholders.
The assumption under the concept of going concern is continuity in normal course and such “continuity of entity operations is usually assumed in financial accounting in the absence to contrary” (Michael J Ramos, page 285)ii Auditors assess the going concern concept whenever substantial doubt is created while following regular and normal audit procedures.”If there are no doubt neither directors nor auditor need refer specifically to going concern in the financial statements or audit report. However, the Combines Code states that directors should report that the business is a going concern with supporting assumptions and qualifications as necessary. “(Lain Gray and Stuart Manson, page 674)iii
Going concern concept assumes an atmosphere of normalcy. Under the going concern concept “the enterprise will continue in operational existence for a foreseeable future.” (Nexia International, page 137)ivWhenever auditors have substantial doubts about the going concern concept it underlies that financial statements have not been prepared under normal circumstances. This is because “the going concern concept is unlikely to be compatible with the intention or necessity to enter into a scheme of rearrangement with the company’s creditors, or make an application for an administrative order, or place the company in administrative receivership or liquidation.”(Saleem Sheikh and William Rees, page 349)v In other words results or status shown by ...Download file to see next pagesRead More
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