Going Concern
Going concern is the assumption that an entity will continue to operate for the foreseeable future; the auditor evaluates whether substantial doubt exists about the entity's ability to continue as a going concern.
Explanation
The auditor must evaluate whether conditions or events raise substantial doubt about the entity's ability to continue as a going concern within one year of the financial statement date (or within one year of the report issuance date under PCAOB standards). If substantial doubt exists and is not alleviated by management's plans, the auditor includes an emphasis-of-matter paragraph (AICPA) or explanatory paragraph in the report. This does not change the opinion — it remains unmodified unless other issues exist.
Key Points
- •Evaluate going concern for one year from the financial statement date (AICPA) or report issuance date (PCAOB)
- •Consider management's plans to mitigate the doubt
- •Going concern language is added as an emphasis-of-matter paragraph, not a modified opinion
Exam Tip
A going concern paragraph does not make the opinion qualified — it is an emphasis-of-matter addition to an otherwise unmodified opinion.
Frequently Asked Questions
Related Topics
Audit Reports
The audit report is the auditor's formal communication of the opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
Fraud Risk Assessment
Fraud risk assessment is the auditor's responsibility to identify and assess risks of material misstatement due to fraud, including fraudulent financial reporting and misappropriation of assets.
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