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Essay / Research Paper Abstract
This 4 page paper looks at the going concern concept and the way it is used. The discussion includes a consideration of how and why it is useful and argues that it is not always appropriate for use, even if the company’s future in not in question. The bibliography cites 10 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEgconcern.rtf
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Unformatted sample text from the term paper:
to continue to trade until the next set of accounts twelve months later (ACCA, 2005). This may be seen as an obvious concern, and may also appear presumptuous in a
changing and competitive environment. In some cases there may be a statement by the auditors that the business is not within the going concern basis, but this is unusual. Even
the aspect of declaring concerns over companies as the going concern concept is ethically questionable (Carcello and Neal, 2000) The concept of
prudence tells the accountant and the auditor to expect the worst and account for expenses but not account for income where it has not yet been earned. In most cases
the going concern concept can be seen as a constraint on the concept of prudence limiting the conservatism shown by the accountant or auditor (Elliot and Elliot, 2005). There
have been concerns that the disclosure itself could be a self-fulfilling prophesy, and as such many auditors may be reluctant to declare the concerns, yet in a recent study it
was show that of the companies where uncertainty as to the going concern status was declared it was not the auditors declaration that brought the company down, but the general
pressures of the financial situation, regardless of whether or not a declaration had been made (Citron and Taffler, 2001). The going concern
concept can be seen as a keystone to other principles of accounting such as the matching and accruals as well as historical costing and conservatism (Elliott and Elliot, 2005). When
a set of accounts are prepared and it is assumed that the company will be continuing this influences the assumptions made regarding the accounts and the way that items are
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