Assume that you are in a situation where you had doubts about your client's ability to continue

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Assume that you are in a situation where you had doubts about your client's ability to continue as a going concern. Further, assume you have decided that, after performing all the required audit procedures, you can issue an unqualified opinion but need to modify the audit opinion to indicate substantial doubt about the client's ability to continue as a going concern. You have to let the CFO, who is a longtime friend of yours, know of your decision.
When you do this, the CFO tries to explain to you that if the company receives a going-concern opinion, it will go under-that the opinion is a self-fulfilling prophecy. The CFO tries to convince you that if your firm does not issue a going-concern opinion, it is very likely the company will be able to weather its financial difficulties and survive. Further, the CFO notes that this is really a matter of professional judgment and believes that many other auditors would not see the need to issue a going-concern opinion. Should you issue a standard unqualified audit report or an unqualified audit report with a going-concern explanatory paragraph? Use the framework for ethical decision making introduced in Chapter to address the dilemma you face regarding what type of opinion to issue. Recall that the steps in the framework are as follows:
(1) Identify the ethical issue(s),
(2) Determine who are the affected parties and identify their rights,
(3) Determine the most important rights,
(4) Develop alternative courses of action,
(5) Determine the likely consequences of each proposed course of action,
(6) Assess the possible consequences, including an estimation of the greatest good for the greatest number,
(7) Decide on the appropriate course of action.

Audit Report
The audit report is issued by a certified public accountant who is appointed by the shareholders to provide assurance upon the truth and fairness of the financial statements prepared by the managers of the company. Audit report contains the...
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Auditing a risk based approach to conducting a quality audit

ISBN: 978-1133939153

9th edition

Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg

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