Is there incremental information content in the going concern explanatory paragraph?

✍ Scribed by Raft Z. Elias; James G. Johnston

• Book ID: 104345524
• Publisher: Elsevier Science
• Year: 2001
• Tongue: English
• Weight: 583 KB
• Volume: 18
• Category: Article
• ISSN: 0882-6110
• DOI: 10.1016/s0882-6110(01)18007-7

✦ Synopsis

Reporting going concern uncertainty is a matter of debate among auditors, users, and standards-setters . This study investigates whether the required going concern explanatory paragraph under SAS No. 59 conveys information beyond that provided in the required footnote disclosure . The information content is measured through responses to a line of credit request from a company with a modified audit report due to going concern uncertainty. A national sample of 285 commercial loan officers were asked to indicate the likelihood of granting a line of credit, their confidence in the decision, the interest rate for the loan, and their perception of the company's potential bankruptcy . Responses indicate no significant information content difference attributable to the explanatory paragraph for a company with a modified audit report and the same company with only a footnote disclosure of the going concern uncertainty based on any of the above measures.