What are the key assumptions of going concern concept?
Going concern principle – What is the going concern principle? The going concern principle is the assumption that a business will continue to exist in the near future, in other words, that it will not liquidate or be forced out of business.
Can going concern value negative?
However, liquidating a company means laying off all of its employees, and if the company is viable, this can have negative ramifications not only for the laid-off workers but also for the investor who made the decision to liquidate a healthy company.
What should an auditor do if s/he believes that substantial doubt exists as to whether an entity is a going concern?
If the auditor believes there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time, he should (1) obtain information about management’s plans that are intended to mitigate the effect of such conditions or events, and (2) assess the likelihood that such plans can …
What is the going concern assumption in regards to the perspective of an auditor performing an audit on a business or organization?
What is Going Concern? The going concern principle assumes that any organization. Organizational structures will continue to operate its business for the foreseeable future.
What is the opposite of a going concern?
A going concern is a company that is currently operating and is also making a profit. A company that is not a going concern has gone bankrupt and liquidated its assets. The opposite of a going concern or profitable company may also be an unprofitable company.
Why do we have to consider going concern assumption in our audit?
assumption is a matter for the auditor to consider on every audit engagement. “Going Concern,” establishes the relevant require- ments and guidance with regard to the auditor’s consideration of the appropriateness of manage- ment’s use of the going concern assumption and auditor reporting.
Is a going concern a qualified opinion?
It’s given when the auditor has doubts about the company and the assumption that it is a going concern. A qualified opinion can be a concern to investors, lenders and other stakeholders.
What is the auditor’s responsibility when there is a substantial going concern issue?
The auditor has a responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time, not to exceed one year beyond the date of the financial statements being audited (hereinafter referred to as a reasonable period of time).
What is substantial doubt about going concern?
Substantial doubt about an entity’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or …
How does going concern affect the audit report?
If the auditor considers that the going concern basis is appropriate and that the disclosures are adequate, then the audit opinion will be unmodified and the auditor’s report will include a section headed ‘Material Uncertainty Related to Going Concern’ which explains the uncertainty.
What do you call a business that is not going concern?
Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary. If a business is not a going concern, it means it’s gone bankrupt and its assets were liquidated.
What is the synonymous term of going concern?
gainful. adjectivevery productive, profitable. advantageous. beneficial. fat.
What is the going concern assumption?
Consequently, under the going concern assumption, the company is assumed to be able to operate in the normal course of business, realize its assets, discharge its liabilities, and obtain refinancing (if necessary). The assessment of a company’s ability to continue as a going concern is the responsibility of company’s management.
When is an entity assumed to be a going concern?
By making this assumption, the accountant is justified in deferring the recognition of certain expenses until a later period, when the entity will presumably still be in business and using its assets in the most effective manner possible. An entity is assumed to be a going concern in the absence of significant information to the contrary.
What is the going concern principle?
What is the Going Concern Principle? The going concern principle is the assumption that an entity will remain in business for the foreseeable future. Conversely, this means the entity will not be forced to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices.
Who is responsible for the assessment of a company’s going concern?
The assessment of a company’s ability to continue as a going concern is the responsibility of company’s management. The appropriateness of management’s use of the going concern assumption, however, is a matter for the auditor to consider in every audit engagement.