FAR Practice Note - Auditor Reporting for Going-Concern Uncertainty: Research Findings and implications for practitioners
The auditor’s decision regarding a going concern opinion (GCO) is among their most important judgments, as GCOs impact the client company, markets, financial statement users, and auditors themselves. Such a sensitive and complex judgement call requires expertise and experience. In the academic literature, GCO decisions are often seen as related to audit quality, and they are among the few observable outcomes of the audit that vary across engagements. In the last decades, academic researchers have spent considerable effort examining GCO decisions. We believe that audit practitioners can benefit from improved awareness of the insights that research has generated. In our complete report (Geiger, Gold, and Wallage, 2019), we review and synthesize 149 academic studies authored since 2013, the end of the previous synthesis by Carson et al (2013). In this practitioner note, we make a selection of what we deem the most interesting insights from our review, and discuss their implications for practice. We then report on our focus group engagement with audit practitioners where we obtained their perceptions regarding some the academic findings, the issues faced in making GCO decisions, as well as areas where additional research would be helpful.
Authors
Marshall A. Geiger, Ph.D., CPA, is the CSX Chair in Management and Accounting and Professor of Accounting at the Robins School of Business, University of Richmond. Marshall has also been an honorary Professor of the Faculty of Business and Law at Deakin University in Australia. He graduated from Penn State University in 1988 with his Ph.D. in accounting and has published over 75 articles, a research monograph, and a Chapter in a research reference book on numerous topics in accounting, auditing and accounting education. Marshall has been recognized as the most prolific accounting scholar among all accounting Ph.Ds graduating worldwide in 1988. He is a past Editor at Auditing: A Journal of Practice & Theory, and former Associate Editor at Accounting Horizons and holds appointments on five editorial review boards of scholarly journals in the US and internationally. Marshall has delivered over 60 educational and research seminars and programs on a broad range of topics in accounting and auditing to a wide range of participants, including audit practitioners, entrepreneurs, academics, lawyers and standard-setters.
Anna Gold is Professor of Auditing at Vrije Universiteit Amsterdam and Adjunct Professor at Norwegian School of Economics (NHH). She earned her PhD at the University of Amsterdam. Her research interests are in the judgment and decision-making area, primarily applied to the field of auditing. Her research has focused on the impact of regulatory changes (e.g., fraud consultation, audit firm rotation, and auditor reporting standard changes) on judgments and decisions of auditors, preparers, and financial statement users. She has also examined how auditors and audit firms manage errors and whether varying the error management climate affects auditors’ error reporting willingness and learning. Her current work focuses on how auditors use specialist advice, the communication between auditors and audit committees, and auditors’ use of audit technology.
She has published her research in outlets such as The Accounting Review, Contemporary Accounting Research, Auditing: A Journal of Practice & Theory, Accounting Horizons, Journal of Business Ethics, and International Journal of Auditing. Professor Gold currently serves as editor at The Accounting Review (2020-2023) and Maandblad voor Accountancy en Bedrijfseconomie (since 2018). She is a member of the editorial board of Auditing: A Journal of Practice and Theory.
Professor of Auditing at VU University Amsterdam and University of Amsterdam