What is Substantial doubt about going concern?
In short
The auditor evaluates whether there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period, which under American Institute of Certified Public Accountants standards matches the accounting framework, usually one year after the statements are issued.
Key takeaways
- The auditor considers management's plans and whether they are likely to be carried out and to reduce the doubt.
- If doubt remains and is properly disclosed, the opinion is unmodified with a separate going concern section.
- Inadequate disclosure leads to a qualified or adverse opinion; a disclaimer is allowed in rare cases.
Where it's tested
AUD: Related Parties & Going Concern — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An auditor concludes that substantial doubt about a nonissuer's ability to continue as a going concern exists, and management has adequately disclosed the situation in the notes. What is the appropriate reporting?