Auditing - What is Going Concern

The video explains the concept of 'going concern,' which refers to a company's ability to continue operations for a reasonable period, typically one year. Auditors assess evidence to determine if a company may cease to be a going concern. If such evidence is found, they discuss it with management and evaluate management's plans to address the issue. If substantial doubt remains, auditors must report it in their audit report. In severe cases, a disclaimer of opinion may be issued, though this is rare.

What is the typical time period considered for an organization's going concern?

• Two years

• One year

• Five years

• Six months

What should auditors do if they find evidence that a company may not continue as a going concern?

• Report it to the shareholders

• Discuss the evidence with management

• Immediately issue a disclaimer of opinion

• Ignore the evidence

What is the purpose of discussing going concern issues with management?

• To evaluate management's plans to address the issue

• To finalize the audit report

• To prepare for a merger

• To determine the company's market value

What must an auditor include in their report if substantial doubt about going concern exists?

• A financial forecast

• A summary of past profits

• A going concern section

• A list of competitors

In what situation might an auditor issue a disclaimer of opinion?

• When the company is highly profitable

• In severe cases of going concern issues

• If the company is expanding

• When the company has a new CEO