ASSESSMENT OF GOING CONCERN IN AUDIT ENGAGEMENTS
Keywords:
going concern, audit risk, ISA 570, financial distress, audit evidence, material uncertainty, financial reporting.Abstract
This article examines the methodological aspects and practical challenges associated with the auditor’s assessment of the going concern assumption in audit engagements. The going concern principle represents a fundamental basis for the preparation of financial statements, and its proper evaluation is critical for ensuring the reliability of financial reporting. The study identifies key risk factors, including liquidity problems, excessive leverage, operating losses, and external economic instability, which may cast significant doubt on an entity’s ability to continue as a going concern. Based on International Standards on Auditing (ISA 570) and empirical analysis, an improved methodological framework for evaluating going concern risk, collecting audit evidence, and enhancing disclosure quality is proposed. The findings contribute to improving audit quality and strengthening stakeholders’ confidence in financial statements.
References
International Auditing and Assurance Standards Board (IAASB). (2015). International Standard on Auditing (ISA) 570 (Revised): Going concern. International Federation of Accountants.
International Auditing and Assurance Standards Board (IAASB). (2009). International Standard on Auditing (ISA) 315: Identifying and assessing the risks of material misstatement through understanding the entity and its environment. International Federation of Accountants.
International Auditing and Assurance Standards Board (IAASB). (2009). International Standard on Auditing (ISA) 540: Auditing accounting estimates, including fair value accounting estimates, and related disclosures. International Federation of Accountants.
Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589–609. https://doi.org/10.1111/j.1540-6261.1968.tb00843.x
Carson, E., Fargher, N., Geiger, M., Lennox, C., Raghunandan, K., & Willekens, M. (2013). Audit reporting for going-concern uncertainty: A research synthesis. Auditing: A Journal of Practice & Theory, 32(1), 353–384. https://doi.org/10.2308/ajpt-50324
Geiger, M. A., & Raghunandan, K. (2002). Auditor reporting for going-concern uncertainty: A research synthesis. Auditing: A Journal of Practice & Theory, 21(1), 123–139. https://doi.org/10.2308/aud.2002.21.1.123
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