Auditor's Treatment of Going Concern in a COVID 19 Perspective

Mehmet Karabacak & Danial S. Sethi

Student thesis: Master thesis


The purpose of this thesis is to investigate how COVID-19 has impacted an auditor’s treatment of a going concern. Therefore, there has been a great focus on the auditor’s responsibilities, risk assessment procedures, subsequent events, and the implications as a result of COVID-19 for the auditor’s report. This thesis contains an analysis in two parts. The first part emphasizes and analyzes what impact COVID-19 has had on the auditor’s work based on qualitative data. The second part of the analysis includes a quantitative investigation of COVID-19’s impact on the auditor’s report. This in addition includes an analysis of specific audit reports from the hotel industry, which has been deeply impacted by COVID-19. The thesis includes primary data in the shape of six conducted interviews with auditors from differ-ently sized audit firms, such as PwC, Deloitte, and Beierholm. Furthermore, an interview with a professor of auditing from Copenhagen Business School (CBS) was conducted. All the interviewed respondents are either state-authorized public accountants or registered accountants who have great insights into the current situation with COVID-19. Additionally, the thesis also includes primary quantitative analyses that are based on financial statements from Navne & Numre Erhverv. This data collection contains 114 small and medium-sized enterprises (SME) from the hotel industry. Based on the obtained data, it is concluded that auditors have become more attentive and skeptical of management’s assessment of going concern. In addition, it is found that auditors carry out additional audit procedures due to the uncertainties relating to COVID-19. Furthermore, based on the collected data, the thesis presents the finding that the disclosures of going concern in the 2019 financial statements where COVID-19 has been a subsequent event have increased significantly compared to a “regular” fiscal year. The analysis has led to a natural discussion about what the future might hold regarding the audit of going concern. It is our opinion that we will see more “emphasis of matter” paragraphs regarding going concern in the audit report in the future. It is therefore also our opinion that we will not see an increasing amount of modified audit opinions because of managements’ great focus on and sufficient assessment of the uncertainties of COVID-19 regarding going concern. Additionally, auditors will likely go into dialogue with the management about the uncertainties regarding going concern.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2021
Number of pages125