Write 7 page essay on the topic Auditing: The Going Concern Assertion.Download file to see previous pages... The auditor plays a very important role while the financial statements of a firm are made.

Write 7 page essay on the topic Auditing: The Going Concern Assertion.

The auditor plays a very important role while the financial statements of a firm are made. Not only do they check the accounts but he is responsible to let the stakeholders know of the financial viability of the business. It is their responsibility to see whether the firm has a future, whether it can sustain for a reasonable period of time (Lawson, 2009). This evaluation is done on the auditor's relevant knowledge about the current and past events (Lawson, 2009). This information could be gained through proper analysis of the financial statements (Lawson, 2009).

The auditor must consider all the available information during the course of audit and raise any substantial doubt about the company's going-concern assumption. In order, to clear their doubt they may also take the help of any additional information that might clear the doubt (AICPA, 2010).

If the auditor has considerable doubt about the going-concern stipulation for a reasonable period of time, then they may obtain the management's plan to mitigate the risk of such a happening and also evaluate the plans in term of its viability (AICPA, 2010).

Once the auditor is certain of the doubts about the firm's ability to perform as a going-concern for a reasonable period then he may disclose the fact in his report along-with an explanation for their decisions (AICPA, 2010).

The auditor does not have lay down any procedure or do any prior planning in order to evaluate the going-concern assumption (Roh, 2007). Rather they simply check for any issue that might raise questions on the going-concern ability during the course of audit (Roh, 2007). Such information generally includes the company's ability to meet the current obligations and maturing obligations without having to adopt any strategy such as selling assets, etc (Roh, 2007).

These guidelines exempted the auditor of the responsibility of predicting the future conditions and events. The auditor just relied on the previous events and the current information.

Auditing and Credit Crunch

The world has recently gone through a serious financial turmoil. In 2001, record breaking 257 companies filed for bankruptcy (Venuti, 2009). Out of the 20 largest US companies, 12 filed for bankruptcy (Venuti, 2009). This was the first time in history. Historians and economists, call this recession one of the worst recessions the world has ever seen (Smart Pros Ltd, 2009). But what, astonishes most is the auditors inability to warn the world before it all happened (Roh, 2007). After all they were the ones who knew about the financial positions of any entity. their reports are the one that people refer to before investing.