All 18 Going Concern questions
More in Going Concern
What basis of accounting is used if an entity is not a going concern? What is the difference between going concern doubt and actual insolvency? Why is going concern important to users of financial statements? What is a support letter (comfort letter) in a going concern context? How does the auditor evaluate management's going concern assessment? What time period does the going concern assessment cover? What are mitigating factors in a going concern assessment? What disclosures are required when there is significant going concern doubt? How does going concern relate to Key Audit Matters (KAMs)? What is a material uncertainty related to going concern?
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Auditing & Assurance › Going Concern

What are indicators that going concern may be in doubt?

Intermediate

Answer

Financial indicators (net liabilities, defaulted or callable loans, negative operating cash flows, inability to pay creditors, adverse ratios), operating indicators (loss of key management/markets/suppliers, labor issues), and other indicators (legal proceedings, regulatory changes, uninsured catastrophes). Any of these may cast significant doubt on the entity's ability to continue.
Financial: net current liabilities, loan defaults, negative cash flow.
Operating: loss of major customer, key staff departures.
Real-world example Breached loan covenants plus negative operating cash flows prompt the auditor to scrutinize going concern closely.

Common follow-ups: What are financial vs operating indicators? | Does one indicator mean going concern fails?

Analytical Procedures Audit Risk & Materiality Going Concern
All 18 Going Concern questions