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Verification of Audited Persons Ability to Continue their Activities as a Method to Identify the Increased Possibility of Their Bankruptcy

Author

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  • Eugene M. Gutzait

    (Financial Research Institute, Moscow 127006, Russia)

Abstract

The article discusses the relationship of economic entities bankruptcy with auditors’ errors in the validity test of assumption of an economic subject’s activity continuity. It is shown that the task of checking the validity of this assumption can be classified as a special case of the problem of economic entities development forecasting. The author examines the definition of a term “continuity of activity” and interprets possible errors of an auditor in the verification of the specified assumptions fairness, based on the standpoint of the general theory of decision under uncertainty, and analyzes the consequences of such errors. The article also presents the research on different difficulties occurring in verification of ability of an economic entity to maintain its continuous activity and provides recommendations on how to overcome them.

Suggested Citation

  • Eugene M. Gutzait, 2018. "Verification of Audited Persons Ability to Continue their Activities as a Method to Identify the Increased Possibility of Their Bankruptcy," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 90-98, June.
    • Handle: RePEc:fru:finjrn:180307:p:90-98
    DOI: 10.31107/2075-1990-2018-3-90-98
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    More about this item

    Keywords

    audit organization; bankruptcy; assumption; individual auditor; international standard of audit; business continuity; doubt; economic entity;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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