Question

What is the “going-concern assumption” in regards to the perspective of an auditor performing an audit on a business or organization? What are the indicators of a potential going-concern problem

Answer 1

	The going concern principle is the assumption that an entity will remain in business for the foreseeable future.
	While going through the auditing procedures the auditor has to assume that the business or organization is a going concern.
	When the auditor is assuming the same it means that the auditor will give its opinion(Qualified or Unqualified) for the current year based on the fact that the organization will continue its operation for a forseeable future. This in a way makes the auditor to take various assumptions upon which his opinion is based.
	The following can be indicators for Going-Concern problem:-
1	Deteriorating liquidity position of a company not backed by sufficient financing arrangements.
2	Significant trading losses bieng incurred for several years
3	High financial risk arising from increased gearing level rendering the company vulnerable to delays in payment of interest and loan principle.
4	Increasing level of short term borrowing and overdraft not supported by increase in business.
5	Bankruptcy of a major customer of the company.