Certain red flags may appear on financial statements of publicly traded companies that may indicate a business will not be a going concern in the future.<\/li>\n<\/ul>\nKeep in mind, however, that if a company plans to obtain additional liquidity through uncommitted credit, it is not used in the evaluation of whether substantial doubt is raised, but rather when evaluating management\u2019s plans in step two of the assessment. Are you preparing financial statements and wondering whether you need to include going concern disclosures? Or maybe you\u2019re the auditor, and you\u2019re wondering if a going concern paragraph should be added to the audit opinion. You\u2019ve heard there are new requirements for both management and auditors, but you\u2019re not sure what they are. External events that create economic uncertainty may have a significant impact on a company\u2019s ability to continue as a going concern and might require robust assessment and entity-specific disclosures.<\/p>\n
Certainly, it would be hard to deny that the pandemic and COVID-19 create events and conditions that may cause doubt about an organization\u2019s ability to continue as a going concern. Depending on the sector in which the entity operates, it may or may not cause significant doubt. The example that everybody uses these days is, if your business happens to make toilet paper, the environment is probably not leading you to question your ability to continue as a going concern. This is especially important for forecasting that management uses in the assessment, where it\u2019s critical a company designs and implements controls appropriately and uses complete and accurate data. Likewise, a company must also think about any related controls, including required review controls necessary to complete the assessment. Aside from those four main items, other obligations may arise that aren\u2019t necessarily contractual, including legal proceedings and any resulting settlements.<\/p>\n
Accountants may use going concern principles to determine how a company should handle a reduction of expenses, sale of assets or shifts to other products. If an auditor issues a negative going concern during an audit, this implies that the auditor suspects the company will have to close business for financial reasons within the next 12 months. We have received questions from members about whether it would be prudent for management to delay the issuance of its financial statements until some of this uncertainty is resolved. First of all, this would be contingent on whether management has the flexibility to delay issuance of its financial statements.<\/p>\n
Prepare Financial Statements<\/h2>\n
An example of such contrary information is an entity\u2019s inability to meet its obligations as they come due without substantial asset sales or debt restructurings. A current definition of the going concern assumption can be found in the AICPA Statement on Auditing Standards No.1 Codification of Auditing Standards and Procedures, Section 341, \u201c The Auditor\u2019s Consideration of an Entity\u2019s Ability to Continue as a Going Concern\u201d.<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"
Content Cash Flows Solvency Ratios Vs Liquidity Ratios: What\u2019s The Difference? Documentation Requirements Relevant Dates Conclusion Types Of Due Diligence Services, And Benefits Prepare Financial Statements It can determine how financial statements are prepared, influence the stock price of a publicly traded company and affect whether a business can be approved for a loan. In […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/posts\/46412"}],"collection":[{"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/comments?post=46412"}],"version-history":[{"count":1,"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/posts\/46412\/revisions"}],"predecessor-version":[{"id":46413,"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/posts\/46412\/revisions\/46413"}],"wp:attachment":[{"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/media?parent=46412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/categories?post=46412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.n-3ds.com\/wp-json\/wp\/v2\/tags?post=46412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}