Video: Going Concern Issues

This lesson covers the assessment and evaluation of going concern issues in financial statements. It explains the importance of having a one-year assessment period for determining whether a company is going to stay in business. The lesson presents various procedures and indicators used to assess and identify going concern issues, such as analytical procedures, debt compliance, board minutes, legal counsel, financial support agreements, and subsequent events. It also delves into the indicators of financial difficulty, internal and external matters, and negative trends. Furthermore, the lesson discusses the process of including an emphasis-of-matter paragraph in the event of substantial doubt about the entity's ability to continue as a going concern.

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Video Transcript

Instructor: Nick Palazzolo

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Let's talk about going concern issues. Right. If we see these, we may have to issue a paragraph. We're going to have to assess these. Talk about these in the management's responsibility section. However, let's talk about this here as well. Well, according to FASB, our going concern initial assessment, we need to see if the clients can be going concerned from the issuance of the financial statements plus one year. So if the company if we issue the financial statements on March 15th, our assessment period of if they're going to stay in business is going to be March 15th of the next year, one year from when they issue financials. All right. And then what are we going to do to assess if there is any going concern issues, if they're going to go out of business? We are going to perform analytical procedures. We're going to assess their debt compliance. If they're not paying their bills, then obviously it's a problem. We are going to read the board minutes, the meeting minutes, the records of what was said. We are going to inquire of legal counsel. We are going to look for financial support agreements through third parties. And lastly, evaluate subsequent events, subsequent events are going to tie in with a lot of items. However, that's going to also help you to assess if there is possibility of bankruptcy, of shutting down, of going out of business. Now, those are our procedures. But what about indicators of a going concern issue? Some items to look for so we could perform certain tests based on if we see some of these particular indicators. However, we could also just we're going to look for these indicators, regardless of the tests we do, if there's any financial difficulty in

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Engagement Results

Module: 2 Concepts, 22 Videos

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Audit Opinions Objectives

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Introduction to Audit Opinions

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