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Auditor's Uncertainty About Going Concern – Predictor of Insolvency Risk

Author

Listed:
  • Hategan Camelia Daniela

    (West University of Timisoara)

  • Predictor of Insolvency Risk

    (West University of Timisoara)

Abstract

The primary indications of some uncertainties about the going concern of an entity can be obtained by investors and the general public in the financial statements and in the audit report. The present paper analyzes the going concern principle based on the regulations in the field of financial reporting and on the basis of the regulations in the field of international, European and national auditing. The financial statements must provide a faithful image of the performance and financial position of the entities, and the auditors must to express an opinion on compliance with all accounting principles. The study showed that in most cases the auditors had uncertainties about the going concern that led to insolvency of companies, and the main underlying factors were the reported losses, negative equity, the business history.

Suggested Citation

  • Hategan Camelia Daniela & Predictor of Insolvency Risk, 2018. "Auditor's Uncertainty About Going Concern – Predictor of Insolvency Risk," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 605-610, December.
    • Handle: RePEc:ovi:oviste:v:xviii:y:2018:i:2:p:605-610
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    References listed on IDEAS

    as
    1. Barnes, Paul, 2004. "The auditor's going concern decision and Types I and II errors: The Coase Theorem, transaction costs, bargaining power and attempts to mislead," Journal of Accounting and Public Policy, Elsevier, vol. 23(6), pages 415-440.
    2. LaSalle, Randall E., 2006. "The civil justice system and going concern audit reports: Comments on "Auditors' decision-making under going concern uncertainties in low litigation risk environments: Evidence from Hong Kong&quo," Journal of Accounting and Public Policy, Elsevier, vol. 25(6), pages 740-745.
    3. Walter Masocha & Pauline Weetman, 2007. "Rhetoric in standard setting: the case of the going‐concern audit," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 20(1), pages 74-100, March.
    4. Lam, Kevin C.K. & Mensah, Yaw M., 2006. "Auditors' decision-making under going-concern uncertainties in low litigation-risk environments: Evidence from Hong Kong," Journal of Accounting and Public Policy, Elsevier, vol. 25(6), pages 706-739.
    5. Ovidiu Megan & Camelia Haţegan & Leonora Caciuc & Bogdan Cotleţ, 2009. "The Cash-Flow Statement - Between True and Manipulation," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 9(2), pages 127-136.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    going concern; auditor’s opinion; auditor’s report; financial statements; insolvency risk; uncertainty;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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