It has been, like, forever, that auditors have been issuing going concern warnings in one form or another. Back in the days when historic cost was the sole basis for measurement of assets, and authoritative “impairment” standards for taking write downs were largely non-existent, it was very understandable that auditors should be required to add qualifying language to its reports when historic cost measures were more misleading than usual.
But, although fine in concept, going concern opinions have been problematic in practice. Below are just a few reasons why:
Not gonna happen — To (loosely) paraphrase Steve Zeff, audit firms are no longer groups of licensed professionals who happen to be organized as a business; they have become customer-focused business decision makers who happen to have professional licenses. As evidence, a Bloomberg study found that auditors failed to provide a going concern qualification for 54% of the 673 largest bankruptcies [Read More...]