Going concern: Revisors afdækning af risiko for going concern

Ditte M.O. Schou

Student thesis: Master thesis


The number of bankruptcies in Denmark has increased significantly after the financial crisis set in. The year 2009 became a record year in regards to the number of bankruptcies, and the tendency appears to continue in 2010. As a consequence of the many bankrupt businesses there is an increasing public interest in auditor’s responsibility in regards to disclose any uncertainties in a company’s ability to continue as a going concern. This increased focus on whether the auditors have performed their work correctly or have a co‐responsibility is adding to the attention on the auditor’s report. Therefore it has been deemed interesting to investigate how an auditor indentify the risk of going concern as a part of the audit and how the auditor is to communicate the conclusion of the audit to the stakeholders. The thesis begins with a theoretical part which features a basic understanding for the concept of going concern and the actual audit procedures hereof based on existing legislation and regulations in this area. The theoretical part is followed by an analytical part, which include practical examples with various issues from published annual reports in 2010 in which the auditors have issued qualifications or an emphasis of matter paragraph information in regards to going concern. This is in order to assess how the auditors in practice have disclosed the risk of going concern, and how this has been communicated to the stakeholders. Based on the attained results in the thesis it has been concluded that the auditor’s knowledge of the company and its surroundings is essential as a part of the auditor’s assessment of going concern. As a consequence of this it has been concluded that the auditor must direct special attention towards attaining an updated and sufficient knowledge of the company in order to minimize the risk of going concern when planning the audit. Furthermore, it has been concluded that the auditor can also minimize the risk by having special attention on auditing subsequent events after the year‐end. It has furthermore been concluded that the auditor’s report in the annual report is the only channel of communication towards the stakeholders of the company, besides the long form audit report for the Board of Directors. Based on this it has been deemed utterly important that the auditor in a clear and concise manner gets to communicate in the auditor’s report all relevant and significant circumstances, which have come to the auditor’s knowledge during the audit. Simultaneously, based on the results in the thesis it has been stated that it can have serious consequences for a company in case the auditor’s report includes a qualification or an emphasis of matter paragraph in regards to going concern. It is therefore recommended that the auditor collect a second opinion from another qualified colleague when assessing the uncertainty of going concern. The circumstances mentioned above are considered to secure that the risk of going concern is disclosed even further and also that the reporting by the auditor is as true and accurate as possible in order for the stakeholders to have the best possible basis for their financial decisions.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2011
Number of pages91