Where an auditor's judgment and opinion can have a significa
Not what you're looking for?
Where an auditor's judgment and opinion can have a significant impact on the stakeholders' perception is when issues of going concern arise. Issues of going concern arise when the auditor determines that, due to certain circumstances, "the client may not be able to continue its operations or meet its obligations for a reasonable period." (Arens, et al., 2006, p. 52)
Auditors often hesitate to make statements regarding going concern because they often turn into "self-fulfilling prophecies." In other words, the auditor says they have reason to worry the company will fail, therefore investors pull out and the company fails. The fear is that the auditor caused the failure by stating their concerns.
What are some situations where an auditor might need to include a statement regarding going concern? What type of opinion would be issued if there was such an issue? Do you think that, with the current economy, we should be seeing more auditors express worries about going concern?
Reference: Arens, A. A., Elder, R. J., & Beasley, M. S. (2006). Auditing and assurance services: An integrated approach (11th ed.). New York, NY: Pearson.
Purchase this Solution
Solution Summary
The solution discusses the auditor's judgment and opinion can have a significant impact on the stakeholder's perception is when issues of going concern arise.
Solution Preview
Where an auditor's judgment and opinion can have a significant impact on the stakeholders' perception is when issues of going concern arise. Issues of going concern arise when the auditor determines that, due to certain circumstances, "the client may not be able to continue its operations or meet its obligations for a reasonable period." (Arens, et al., 2006, p. 52)
Auditors often hesitate to make statements regarding going concern because they often turn into "self-fulfilling prophecies." In other words, the auditor says they have reason to worry the company will fail, therefore investors pull out and the company fails. The fear is that the auditor caused the failure by stating their concerns.
What are some situations where an auditor might need to include a ...
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.