Uncertainty Raising Going Concern Doubts

Auditor may conclude there is substantial doubt of entity's ability to continue as going concern
for reasonable period
Reasonable period assumed to be up to one year beyond date of financial statements
 Auditor may still express an unqualified opinion
 Auditor modifies report by adding explanatory paragraph after opinion paragraph
Conditions & events may raise going concern to doubts
Operating losses, negative cash flows, or other negative trends

Loan defaults, dividend arrearages, or other indications of financial difficulty

Labor difficulties or other internal matters
Obsolescence of patents, declining industry, or other external matters
Management's plans may reduce doubts
Disposal of assets
Reduction of discretionary expenditures
Increase in equity or decrease in dividend requirements
1

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Uncertainty Raising Going Concern Doubts (continued)

Audit procedures may identify going concern issues
Analytical procedures
Review of subsequent events
Examination of debt agreements to determine compliance
Reading of minutes of board meetings
Making inquiry of legal counsel
Confirming with others arrangements for financial support

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