Elizabeth A. Evans Hong Qiao
Most financial statement preparations and audits assume a going-concern status for the firm under examination. That is, they assume that the firm will dispose of its inventory in the normal course of business, not in a liquidation sale. Why, however, should management, investors, and auditors make that assumption? How should auditors proceed when they believe that a firm lacks the viability of a going concern?
This chapter examines the duties of auditors to analyze whether the audited firm is a going concern and the duties of management in preparing information for auditors. It will also describe how the legal standards differentiate a going-concern and other issues from those of negligence and fraud. This chapter also briefly describes some basic factors that illustrate ...