Going concern: Revision i en krisetid

Kamilla Skov Nielsen

Student thesis: Master thesis


The main purpose of this thesis is to analyse the work of the accountant with regards to Going Concern in a time of economic crisis. Will a company be able to carry on for a period of 12 months? The current crisis started around 2008. Companies discovered a new reality where the dependency on fellow companies was apparent. Not only were internal measures important in the survival of the company but the entire food chain of supply and demand also became vital. In an attempt to guard from losses, banks ceased giving loans and the companies were squeezed on liquidity. When banks change tactics so abruptly everyone feels it, and the public reaction was to stop spending money. The food chain was smashed, liquidity dried out and sales dropped while the lines of credit became shorter and funds from creditors became more difficult to obtain. The public reaction also manifested itself in a never before seen scepticism towards accountants. Firms auditing companies were simply accused of not doing a good enough job. In this thesis the role of the accountant is debated. It is argued that the harsh accusations are not always properly placed and the role of the accountant is analysed. In order to offer the reader full insight into this role, which is crucial in the determination of Going Concern, theories such as the expectation gap and the problem of Principal-Agent are used. In the planning process the accountant must devote time and effort to the task of getting to know the company. He must familiarise himself with the problems faced by the particular company, and through this process decide the thoroughness of his auditing. The following are merely some of the important questions in the planning process: Does the company use valuations that are too optimistic? Is the need for new capital growing, and are lenders willing to help? Is there a dependency on few, large costumers? How big is the threat from new competitors? Another factor is the risk of criminal activity. With the crisis come great incentives to commit fraud- “If we can just make it through until next year our problems will go away!” This could be a sentence used by a company in trouble and in risk of using fraud to get through. Firstly the accountant must obtain complete insight into the internal controls used by the company. Are they properly done or are there risks of fraud? Types of fraud can take two forms, one is fraudulent financial reporting and the other is misappropriation of assets. Where fraudulent reporting is more common with management and board, asset misappropriation is more common with employees but both can happen at all scales and levels. In light of the crisis the importance of seeking out fraud is emphasised in this thesis, with focus on the extent of fraud among Danish companies.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2012
Number of pages97