Abstract:
One of the most difficult and subjective assessments an auditor must make is the assessment of a company's ability to continue as a going concern. The greatest question, however, is "What are the auditor's responsibilities with respect to going concern?" SAS No. 59 provides some guidance. The auditor's responsibility is to actively consider the entity's going concern status on every audit engagement. The auditor does this by following these steps: evaluating information already obtained from testing other audit objectives, evaluating management's plans to alleviate any negative conditions present, and deciding which opinion to render based on the information found in the previous steps. SAS No. 59 which superseded SAS No. 34 helped clarify the expectations of the auditor with respect to going concern, but it did not provide any objective tests for the auditor to use in his evaluation (Ellingsen et al. 1989, 25). Therefore, the final decision on an entity's going concern status is highly subjective.
