A Company Is a Going Concern If Brainly

“. The management of Ciba Geigy Limited and The Holderbank Group report a long list of management gains from improved financial disclosure [footnote omitted]. Divisions now report consistently, there is a more rational allocation of costs and expenditures are no longer charged to the surplus. In short, they found it easier to run the business.. (p. 1357) On the other hand, other factors may continue to impede foreign access to U.S. markets. For example, some foreign companies have expressed concern about the risk of litigation and certain disclosure requirements that may accompany entry into U.S. markets.20 Foreign companies may also face domestic pressures to maintain primary listings on domestic exchanges. In the past, accounting firms have developed internal quality control systems based on their national activities. However, as clients of accounting firms have turned to global operations, accounting firms have followed suit and are now working globally.

As a result, quality controls within audit firms based on separate national systems may not be effective in a global operational environment. We are concerned that audit firms have not developed and maintained adequate internal quality control systems globally.8 SEC staff participate in the application of accounting standards on a daily basis as part of its review and comment process. This review process, administered by the Corporate Finance Division, allows staff to review and comment on an entity`s application of GAAP and related SEC disclosure requirements. SEC staff would have the same important role of interpretation and application in the application of IASC standards when these standards are used to prepare the financial statements contained in documents filed with the SEC.38 To fulfill this role, our staff should develop expertise in IASC standards.39 IOSCO is an association of securities regulators. It has approximately 135 ordinary members, associates and affiliates, twelve of whom are based in the United States. Two important IOSCO committees that follow this project are the Technical Committee and its Working Group No. 1 on Multinational Disclosure and Accounting. The Technical Committee is composed of 16 regulators46 that regulate some of the largest, most developed and most internationalized markets in the world. The aim is to examine the main regulatory issues related to international securities and futures transactions and to coordinate practical responses to these concerns.

The Commission and the Commodity Futures Trading Commission are both members of this committee. We are represented by a member of the Commission. If there is significant evidence that a private entity may not be viable under the going concern assumption, the auditor must disclose it in the audit report. Even if the company`s finances are not audited, an accountant who has concerns about the viability of the business should communicate those concerns to the business owner. The auditor is required by the Securities and Exchange Commission to disclose in the financial statements of a publicly traded company whether the going concern status is questionable. This can protect investors from continuing to risk their money for a business that might not be profitable for much longer. The concept of going concern is not clearly defined anywhere in generally accepted accounting principles and is therefore subject to a significant interpretation of when an entity should report it. However, Generally Accepted Auditing Standards (GAAS) require an auditor to consider an entity`s ability to continue its activities. Liquidation accounting: If it turns out that the business needs to cease operations, the accountant may need to “write off” the value of the company`s inventories or other assets, which reduces the overall value of the business. Audit requirements may not be sufficiently developed in some countries to provide the level of increased reliability that investors expect in U.S. financial markets.

Nevertheless, audit firms should have a responsibility to adhere to the highest quality assurance practices – globally – to ensure that they conduct effective audits of global companies participating in international financial markets. To this end, we believe that all member or affiliated entities conducting audit work with a global audit client should follow the same high-quality audit practices, even if compliance with these higher practices is not required by local legislation.4 Others expressed similar concerns.5 The pace of the IASC work program required that, immediately after the adoption of a final standard, the staff of the Group and Commission attention to other outstanding standards. As a result, the Group and the Commission services have continued to assess each completed standard and to what extent they address the concerns expressed in the comments. This approach was also in line with the agreement between the IASC and IOSCO that the working group would evaluate completed standards individually and as a group once the IASC had finalized all the core standards. This assessment of the core standards is currently underway and focuses not only on the extent to which the completed standards address IOSCO`s concerns, but also on whether the IASC standards work together to provide an operational basis for accounting. These concerns are offset by the significant benefits realized by U.S. GAAP reporting companies due to improved quality of information available to management and shareholders as a result of U.S. GAAP reporting.18 It is important that convergence does not sacrifice key elements of high-quality financial reporting currently enjoyed by U.S. investors.

Investors benefit when they can compare the performance of similar companies, regardless of where those companies are based or in which country or region they operate. Quality audits start with high quality inspection standards. Recent events in the United States have highlighted the importance of high quality assurance standards while raising questions about the effectiveness of today`s audits and audit processes.3 We are concerned about the training, expertise, and appropriate resources used in today`s audits. “Going concern” is an accounting term used to describe a business that is expected to operate for the foreseeable future, or at least within the next 12 months. It provides that the company will be able to generate revenue, meet its obligations and will not have to plan or liquidate in the coming year. When assessing the quality of IASC standards, we apply these criteria on a standard-by-standard basis and on IASC standards as a whole. In the statements submitted to the IASC, SEC staff raised concerns, including, but not limited to: additional financing, if possible, or debt restructuring to avoid liquidation of the company. When an auditor issues a going concern rating, how his or her opinion is disclosed depends on the structure of the entity. An auditor is hired by a company to assess whether its business continuity assessment is correct. After a thorough review (audit) of the company`s finances, the auditor will provide a report with his assessment. However, the liquidation of a company means laying off all its employees, and if the company is viable, this can have a negative impact not only on the laid-off workers, but also on the investor who made the decision to liquidate a healthy company.

The liquidation of an ongoing business can give an investor a bad reputation among potential future acquisition targets. 8 See, for example, 34-40945, AAER-1098 (PricewaterhouseCoopers) and letter from the SEC`s Chief Accountant to the AICPA SEC Practice Section of 30 November 1998 and 9 December 1999 on the need for global internal quality controls on independence issues, available on the SEC`s website under . We asked the Public Oversight Board to sponsor audits at other accounting firms and oversee the development of improvements to quality controls and other professional standards to address this issue. It is up to the business owner or management team to determine whether the business can continue for the foreseeable future. If it is determined that the enterprise is stable, the financial statements are prepared on a going concern basis. This allows certain prepaid expenses to be carried forward to a later date. The principle of business continuity is the assumption that a company will remain in business for the foreseeable future. Conversely, this means that the company will not be forced to cease operations and liquidate its short-term assets at very low emergency selling prices. Under this assumption, the accounting officer is entitled to defer the recognition of certain expenses to a later period during which the company is likely to still be in business and to use its assets as efficiently as possible.

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