• P-ISSN 0974-6846 E-ISSN 0974-5645

Indian Journal of Science and Technology


Indian Journal of Science and Technology

Year: 2016, Volume: 9, Issue: 14, Pages: 1-11

Original Article

Problems of Professional Judgment Application in Evaluating the Company’s Going Concern


Background/Objectives: The main purpose of this article is to develop ways of improving the audit technology of audited entity’s ability to continue as a going concern to overcome the drawbacks of available procedures. Methods: Such ­scientific methods as observation, abstraction, analogy, deduction, abduction, induction, analysis, synthesis, ­formalization and ­modeling, as well as specific methods: retrospective analysis, comparative analysis and data grouping were used. A distinctive feature of the author’s technique is risk-based modeling of in-house audit standards with respect to evaluating the entity’s ability to continue as a going concern, based on the identification of labile areas of audit opinion and ­neutralizing them through the establishment of professional judgment borders. Findings/Improvements: The article has identified the main areas of uncertainty of preparation of accounting (financial) statements in a liquidation (bankruptcy) situation, as well as the problem of identifying these areas by the auditors in the course of the risk assessment and substantive ­procedures determined by the existing International Standards on Auditing (ISA 570).In the context of quality problem ­solution, the main risks in inadequate identification and assessment of importance of separate features of the audited ­entity’s ­ability to continue as a going concernhave beendetermined.Themaindirections ofin-house testing ­standardization of going concern assumption of an audited entity have been proposed and substantiated. Application: Implementation of these proposals will allow the independent auditors (audit organizations) and internal auditors to ensure the principles of objectivity, adequate diligence and audit rationality.

Keywords: Audit Evidence, Auditor’s Judgment, Economic Activities Risks, Going Concern Assumption


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