Going concern
Also called: material uncertainty related to going concern
The assumption that a company will keep operating for the foreseeable future. Doubt about it is one of the most serious warnings an auditor can give.
Financial statements are prepared on the assumption that the business will continue. If there is a material uncertainty about that, for example because the company may not be able to repay or refinance its debts, the auditor must draw attention to it in the report.
Example
A report noting a material uncertainty about going concern because loans fall due with no refinancing agreed is a major red flag.
Learn more in these lessons
- The auditor's reportWhat does an auditor's report tell investors?
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