Going Concern Harvard Case Solution & Analysis

Introduction 

The concept of going concern has been researched for many years at both academic and professional levels.  The International Standards on Auditing (ISA 570) states that the auditor’s responsibility is to obtain sufficient, appropriate audit evidence about the appropriateness of the management’s use of the going concern assumption in the preparation of the financial statements and to conclude whether there is a material uncertainty about the entity’s ability of continue as a going concern. Irrespective of the explicit statement in the financial reporting framework, the management should assess the assumption of going concern in the preparation of the financial statements(G5INTERNATIONAL STANDARD ON AUDITING 570 GOING CONCERN).

The focus of this thesis includes the detailed assessment of the meaning of going concern assumption. It also includes codes of ethics for accountants. It also shows the management and auditor's responsibility as well as reporting of going-concern assumption according to the International Standards of Auditing. Then, it moves forward by stating the indicators of going concern problems. Then, it discusses the relation between going-concern issue and the bankruptcy as well as the ways to assess them. The role of corporate governance to improve the worsening condition of the company is also discussed. Finally, the difficulties faced by auditors to assess going concern and the ways to improve it are discussed in the conclusion

The audit report is the result of the audit process and it provides important information about the company to creditors, investors, owners, management, employees and others. If the auditors do not issue an opinion on the going-concern status of the organization and the business experience difficulties in the operation  that threaten  its existence, then the auditors will be held responsible for the adverse consequences to stakeholders for not issuing a going-concern opinion.

Code of Ethics for Professional Accountants

The Accountants have the responsibility to act in the public interest. Therefore, an accountant is not only responsible to its clients or employer, he is responsible to act in the public interest. An accountant is obliged to apply five fundamental principles in his profession. These principles include Integrity, Objectivity, Professional Competence and due care, Confidentiality and Professional behavior(CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS).

Integrity

A professional accountant should be straight forward and honest in all professional and business relationships(CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS).

Objectivity

A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional and business judgment(CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS).

Professional Competence and Due Care

A professional accountant has a continuing responsibility to maintain professional knowledge and skill at the level needed to assure that a customer or employer receives a competent professional service established on current developments in practice, legislation and techniques.A professional accountant should work diligently and in conformity with applicable technical and professional standards when providing professional inspection and repairs(CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS).

Confidentiality

A professional accountant should respect the confidentiality of information acquired as aresult of professional and business relationship and should not divulge any such data to third parties without proper and specific authority unless there is sound or professional right to unwrap.Confidential information required as a result of data and business relationship should not be utilized for personal advantage of the professional accountant or third parties(CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS).

Professional behavior

A professional accountant should comply with relevant laws and regulation an should avoid anyaction that discredits the profession(CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS).

Every professional accountant and auditor should keep in mind that these principles should be followed while assessing that the company is a going-concern or not. Integrity while reporting should be at the heart of auditors and accountants because inappropriate reporting regarding going concern can have adverse effects on stakeholders.

Going Concern Case Solution

Management Responsibility regarding going concern

The going-concern assumption is a foundation for the preparation of financial statements. Going Concern assumption states that an organization will have the ability to continue in the future for the foreseeable future. The management of the company does not have any intentions to liquidate, stop trading or seek protection from creditors. Therefore, the assets and liabilities are recorded on the basis that the assets will be realized and liabilities settled in the normal course of business.(International Standards on Accounting (UK and Ireland)).

Since going-concern assumption is the foundation of the financial statements, the management is responsible to assess whether the company has the potential to continue as  a going concern. The management may make an assessment without its detailed analysis if they have a history of profitable operations.(International Standards on Accounting (UK and Ireland)).................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution

Other Similar Case Solutions like

Going Concern

Share This