The Going Concern Assumption Essay

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The article titled “The Going Concern Assumption: Critical Issues for Auditors” written by Bor-Yi Tsay and Sean Chen found in the CPA Journal talk about the going concern issue to how it affects auditors and the challenges that auditors risk in issuing a going concern or not. As Bor-Yi and Sean Chen focus on this article “is to present the relevant issues surrounding the topic of the going concern assumption in financial reporting and auditing.” Bor-Yi and Sean Chen started their article by talking about that the going concern assumption has been under review for the past decade due to many businesses going bankrupt these last ten years such as General Motors and with Enron and WorldCom. To begin, on the issue of going concern is that in …show more content…
To start, on the topic of management’s implicit assertion is they described in their article that of long-term assets and liabilities requires validity for the going concern assumption to effectively work as without this the financial statements based on accrual-basis accounting is misleading. Second, with going along with the topic on management’s explicit disclosure is talked about as they present three scenarios in which management is required to validate their going concern with their financial statements under ASC 205-40 to what management must do when fallen under one of these three scenarios. Third, the auditor’s examination of the going concern assumption is that auditors also have a responsibility in validating management’s going concern as if there was “substantial doubt” that existed or not to if there was to get information on management’s plans to further determine if one still existed as these were under AU 341, SAS, or AU-C 570 that related to going concern. Fourth, that Bor-Yi and Sean Chen talked about was on auditor’s errors of judgment that related to going concern as the risks they have when looking over the going concern assumption as having type 1 and type 2 errors. In addition, with this they briefly described the two as “type 1 error occurs when an auditor concludes that the going

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