Abstract Statement on Auditing Standards No. 59 requires that auditors evaluate the going-concern status of each client. Determining whether a firm will continue as a going concern can be a complex process. Since many data items are potentially relevant, the task is relatively unstructured. In spite of these cognitive demands, previous studies suggest significant agreement among auditors' going-concern judgments. Results of this study reveal a lack of consensus among both experienced and less experienced auditors who were given information for a problem firm. This lack of consensus may explain why auditors often disagree on the appropriate audit report for a problem firm. Also reported are models of the judgment processes of both experienced and less experienced auditors. Auditors in both groups placed more emphasis on the current liquidity and expected profitability of the client than on other financial indicators. Moreover, experienced auditors generated more positive going-concern judgments.
JOANNA L. HO (Tue,) studied this question.