jurnal going concern going where

24
1 GOING CONCERN? GOING WHERE? by Howard Turetsky Accounting Doctoral Student Virginia Commonwealth University 1015 Floyd Avenue P.O. Box 844000 Richmond, VA 23284-4000 (804) 330-4321 E-mail [email protected]

Upload: ratzman-iii

Post on 24-May-2015

307 views

Category:

Business


2 download

TRANSCRIPT

Page 1: Jurnal   going concern going where

1

GOING CONCERN? GOING WHERE?

by

Howard TuretskyAccounting Doctoral Student

Virginia Commonwealth University1015 Floyd AvenueP.O. Box 844000

Richmond, VA 23284-4000

(804) 330-4321E-mail [email protected]

Page 2: Jurnal   going concern going where

2

Abstract

Legislators continue to question whether auditors assume

sufficient responsibility in evaluating an entity’s ability

to "continue" as a "going concern." Invariably the finger is

pointed at the auditor when a company fails shortly after

receiving an unqualified opinion. The major criticism is

that the accounting profession is not providing the public

with early warnings of corporate financial distress. With a

proactive view towards conservatism, providing early warning

signals, and delimiting litigation risk, the purpose of this

paper is to propose new auditing standard guidelines for

considering "An Entity’s Ability to Continue as a Going

Concern." The proposal is founded on a critical perspective

of the historical background and salient criticism of the

going-concern "assumption" and applicable auditing standards.

Page 3: Jurnal   going concern going where

3

GOING CONCERN? GOING WHERE?

Legislators, in reaction to a higher incidence of

business failure, continue to question whether auditors

assume sufficient responsibility in evaluating an entity’s

ability to "continue" as a "going-concern." The issue of

audit reporting for companies in financial distress is of

particular public interest.1 Invariably, the finger is

pointed at the auditor when a company fails shortly after

receiving an unqualified opinion2 - defined by some as "audit

failure."3 Throughout the 1980s and 1990s, creditors,

investors and government regulators have brought suits

against accountants for corporate failures.4 Warranted or

not, the public press is unforgiving when investors and

creditors are out hundreds of millions of dollars.

The major criticism, as noted by Congressmen Dingell and

Wyden, is that the accounting profession is not providing the

public with early warnings of corporate financial distress.5

Carmichael and Pany (1993) argue that the ability of an

audit to provide adequate warning of impending failure

1

Per Raghunandan & Rama (1995), the House of Representatives held aseries of hearings (1985, 1990, 1993) regarding the accountingprofession, in particular the issue of reporting for distressedcompanies. 2 Ellingson, Pany & Fagan (1989). 3 Carmichael, Messier, Mutchler, Pany & Sullivan (1995). 4 Abbott (1994). 5 Carmichael et al. (1995), Raghunandan & Rama (1995).

Page 4: Jurnal   going concern going where

4

reflects directly on the validity of the report.

The problem, in conveying a timely financial distress

message, is that auditing standards have not succeeded in

mitigating the "expectation gap"--"the difference between

what the public and financial statement users believe

auditors are responsible for and what auditors themselves

believe their responsibilities are."6 According to McKeown,

Mutchler, and Hopwood (1991b), users expect the auditor to

issue a financial distress warning, regardless of auditing

standards, and might thus consider absence of any warning

signal to be an audit error. However, controversy persists

within the profession itself as to the auditor’s

responsibility for reporting on an entity’s "going-concern"

status.7 Fundamental to the issue are the conflicting views

as to the meaning of "going-concern"; or more pertinent, when

is an audit report modification expressing doubt about

continuity appropriate?

In 1978, the Cohen Commission on Auditors’

Resposibilities concluded that an audit report going-concern

modification is superfluous and unnecessary. Asare (1990)

cites several studies that support this "irrelevancy" stance.

Consistent with the "efficient market hypothesis",8

proponents argue that a report modification does not provide

6 Guy & Winters (1993), p. iii. 7 Abbott (1994). 8 According to theory, the securities market quickly reflects allpublicly available information in share prices.

Page 5: Jurnal   going concern going where

5

additional information beyond that already disclosed in the

financial statements and accompanying notes.9

In contrast to the lack of theoretical support for

report modification provided by market-reaction studies,

there is a very real-world "relevancy" argument for "red-

flagging" a going-concern uncertainty. According to

Raghunandan and Rama (1995), research consistently indicates

that more than half the companies filing bankruptcy do not

receive a prior going-concern report modification. This Type

II auditor error10 invites public scrutiny and maintains the

auditor’s litigious position. St. Pierre and Anderson (1984)

document that a more rigid application of the "conservatism"

doctrine, which includes "red-flag" audit report signals, can

reduce auditor litigation risk.

With a proactive view towards conservatism, providing

early warning signals, delimiting litigation risk, and

minimizing the going-concern controversy, the purpose of this

paper is to propose new auditing standard guidelines for

considering An Entity’s Ability to Continue as a Going

Concern. The proposal is founded on a critical perspective

of the historical background and salient criticism of the

going-concern "assumption" and applicable auditing standards.

9 Carmichael et al. (1995). 10 Type II error in that auditors accept the "null" = "no" distresssignal, when in fact there is distress.

Page 6: Jurnal   going concern going where

6

Historical Background

Going-Concern has its roots as a basic assumption upon

which accounting valuation is based. Paton (1922), in his

pioneering Accounting Theory, lists "going concern" as the

second postulate - assumption of expediency - without which

the accountant is unable to proceed. After the existence of

the entity is assumed, the accountant, as a corollary, takes

for granted the "continuity of this entity." The implication

is that the firm will continue "indefinitely." Wolk,

Francis, and Tearney (1992) note that "going concern" becomes

indefinite because the time period is presumed to be long

enough to conclude the firm’s present contractual

arrangements; however, by the time these are concluded there

are new arrangements, and the firm becomes "ongoing."

Although the going-concern continued to be cited as a

postulate-assumption-convention,11 the AICPA issued "Statement

on Auditing Procedure" (SAP) No.15 in 1942 as an initial

formal attempt to consider the effect of "uncertainties."

Going concern, while not a distinct audit consideration, was

included in the uncertainties to be considered in issuing the

audit report. The Statement suggested that when the

cumulative effect of uncertainties was great, the auditors

might report an exception or possibly not render an opinion.

11 Gilman (1939); American Accounting Association (1957); Sanders,Hatfield & Moore (1959); Moonitz (1961); Sprouse & Moonitz (1962).

Page 7: Jurnal   going concern going where

7

Subsequently, the SEC, in Accounting Series Release (ASR)

No.90 (1962), and the AICPA, in SAP No.33 (1963), required

the audit opinion to be "qualified" by the phrase "subject

to" when uncertainties were opined to materially affect the

financial statements.

The first formal segregate attention given to the-going-

concern uncertainty was "Statement on Auditing Standards"

(SAS) No.2 (1974),12 which concluded that an uncertainty

concerning an entity’s ability to continue should be reported

in the same manner as other uncertainties. Subsequently, in

1981, the Auditing Standards Board issued SAS No.34, "The

Auditor’s Considerations When a Question Arises About an

Entity’s Continued Existence," to provide operational

guidance to auditors when questions arose about a firm’s

continued existence. In accordance with the premise that

reports be modified for going-concern uncertainties (and

contrary to the Cohen Commission’s 1978 recommendation to

eliminate report modifications due to uncertainties), SAS

No.34 maintained the "subject to" qualification. However,

under SAS 34, auditors were required to consider the going-

concern issue only when the results of other audit procedures

brought forth information that was contrary to continued

existence. SAS No.34 was thus "passive" in that the auditor

was not required to "search" for evidential matter relating

12 Issued by the AICPA’s "Auditing Standards Executive Committee," thepredecessor of the "Auditing Standards Board."

Page 8: Jurnal   going concern going where

8

to an entity’s continuity. Going concern was still

"assumed."

After considerable deliberations, the Auditing Standards

Board, in 1988, issued SAS No.59, "The Auditor’s

Consideration of an Entity’s Ability to Continue as a Going

Concern," as one of nine SASs addressing the "expectation

gap." SAS 59 replaced the "subject to" qualified opinion

with an explanatory paragraph that follows (modifies) the

"opinion."13 However, the major impact of SAS No.59 is that

auditors are required to take a more proactive approach to

the consideration of going-concern. The auditor now has a

responsibility to evaluate whether there is "substantial

doubt" about an entity’s ability to continue for a reasonable

period of time, "not to exceed one year" beyond the financial

statement date.14 Thus, the auditor has an affirmative duty

to consider carefully conditions and events (i.e. negative

trends & possible financial difficulties) that could impact

going-concern status. Continuity is no longer an assumption.

The significance of the historical background is a trend

that is clearly depicted. Going concern was initially viewed

as a postulate-assumption-convention that was customarily

unquestioned by the accounting profession. It was

subsequently addressed by auditing standards in aggregate

13 This directly tracks to the requirement of the FASBs SFAS No.5. 14 In 1990, SAS No. 64 was issued to require that the terms"substantial doubt" & "going-concern" be included in the paragraphdiscussing a going-concern uncertainty.

Page 9: Jurnal   going concern going where

9

with other uncertainties. SAS No.34 did provide separate

guidance to auditors in assessing a company’s continued

existence; however, the approach was passive and going-

concern was only to be addressed when contrary information

presented itself. With the issuance of SAS No.59, the

accounting profession was acknowledging that there is an

expectation gap and that an entity’s continued existence can

no longer be assumed. The auditor now has an affirmative

responsibility to evaluate the entity as a going-concern.

The issue is whether SAS No.59 objectively delimits the

expectation gap, especially given the prevalent legal

consequences being absorbed by the profession.

Criticism

Criticizing the Assumption

While Paton (1922) did note the speculative element of

the going-concern postulate, he acknowledged that the

assumption of continuity was a necessary convention without

which the accountant could not proceed. The going-concern

convention was postured to be indispensable in precluding the

reporting of liquidation (current) values, thus fixing

"historical cost" as the prescribed valuation measure.

Fremgen (1968) criticizes this view, citing that various

writers have found the going-concern to be consistent with

significantly different principles of asset valuation. He

Page 10: Jurnal   going concern going where

10

questions even the relevancy of the going-concern concept to

accounting, noting that the formulation of accounting

principles has not relied on this concept. Official

pronouncements have generally ignored the continuity

assumption in arguments supporting the promulgation of

accounting principles.

Additionally, the assumption of continuity is by its

very nature non-conservative. Fremgen warns that a potential

dangerous implication of the going-concern concept is that

"it can quite logically be construed to mean continued

operation at a profit,"15 violating the intended

"conservatism" in accounting. Sterling (1967) similarly

points out that application of historical cost (per the

going-concern) can result in an "unconservative" value

greater than market for a distressed firm.

Sterling (1968) further posits that the historical cost

realization method is valid only when a firm is "stationary,"

but a firm is engaged in a continuing process of change; and

there is "uncertainty" about what the future holds.

According to Sterling, the major problem with the going-

concern concept is its false inference of "indefinite life."

In light of the evidence that companies have "limited life,"

Sterling makes a case that "accounting reports ought to show

something about the likelihood of the firms continuing

instead of the reports being prepared under the assumption

Page 11: Jurnal   going concern going where

11

that it will continue."16 Paton (1922), in spite of the

infrequency of corporate failure in his environment, had the

foresight to remark that the balance sheet is provisional,

with validity dependent on uncertain future events. Also,

"if the trend of events points toward bankruptcy in a

particular case the financial reports should be so

constructed that all interested are apprised of the real

situation."17

Sterling (1967) emphasizes that the courts do not assume

future corporate activity when they seek to restore rights in

the event of damages to investors and creditors. In today’s

litigious environment, the argument that "indefinite life"

cannot be assumed has greater relevance. Continuity should

be more in the nature of a prediction than an underlying

assumption.18 In light of the prevalence of financial

distress, the issue is whether auditing standards

appropriately address the "uncertain" nature of a "going

concern." As Fremgen (1968) questions: Going Where?

Criticizing the Auditing Standard

Despite the early criticism regarding the going-concern

inference of "indefinite life" and potential risk to auditor

liability, the standard setters were relatively slow to

15 Fremgen (1968), p. 656. 16 Sterling (1968), p. 494. 17 Paton (1922), p. 480. 18 Wolk, Francis & Tearney (1992).

Page 12: Jurnal   going concern going where

12

react. Only in 1988, with the issuance of SAS #59, did the

Auditing Standards Board mandate a proactive responsibility

for evaluating "going concern." The issue is whether this

standard objectively guides the auditor and whether it

effectively delimits the expectation gap.

Criticism of prior going-concern uncertainty auditing

standards is relevant to evaluating whether SAS #59 rectifies

pre-existing problems. Prior to SAS #59 there were

significant inconsistencies in the issuance of a going-

concern qualification. As noted by Raghunandan and Rama

(1995), research spanning a wide spectrum indicates that

auditors gave going-concern qualifications to less than 50%

of the firms that actually went bankrupt in the subsequent

accounting period.19 In addition to this Type II error,

Altman and McGough (1974), Shindledecker (1980), and Altman

(1982) found that auditors err, by as much as 75%, in issuing

going-concern qualifications to firms that did not go

bankrupt (i.e. Type I error). Other studies addressing

financial distress (instead of specifically bankruptcy) also

found significant discrepancies between recognition of

financial distress by auditors and actual qualification.20

The predominant explanation for the incongruous going-

concern opinions is that auditor opinion is confounded by an

19 Altman & McGough (1974); Altman (1982); Menon & Schwartz (1987);Hopwood et al. (1989); McKeown et al. (1991a); Koh (1991); Chen & Church(1992). {for dates subsequent to #59, the sample was still prior.} 20 Libby (1975b); Casey (1980); Kida (1980).

Page 13: Jurnal   going concern going where

13

"agency" predicament based on the perceived consequences of

disclosing a going-concern uncertainty.21 There is the

concern that a going-concern warning of imminent financial

distress, taken seriously by creditors, investors, suppliers

and customers, will in and of itself become a "self-

fulfilling prophecy" and precipitate the client’s insolvency.

Alternatively, not appropriately disclosing the uncertainty

can lead to litigation and a damaged reputation.

A more rudimentary explanation for going-concern report

inconsistencies is the tacit sanctioning of auditor

"flexibility." Under SAS #34, the auditor did not have an

affirmative duty for going-concern evaluation. This

"passive" role allowed the auditor-client relationship and

other external factors to influence/confound the auditor

opinion. SAS #59 does establish an active responsibility to

evaluate the going-concern. The question is whether the

Standard is successful in restricting auditor flexibility

that results in "bias."

Raghunandan and Rama (1995) specifically address audit

reports for companies in financial distress, before and after

SAS #59. Their results suggest that subsequent to SAS #59

auditors are more likely to issue going-concern modified

reports for both financially stressed non-bankrupt companies

and for companies that did go bankrupt in the subsequent

period. A finding of 62%, in the post-SAS #59 period, for

21 Altman (1983).

Page 14: Jurnal   going concern going where

14

the proportion of bankruptcies with prior going-concern

modified reports is significantly better than the norm of

less than 50% for the pre-SAS #59 period; however, a 35%

frequency of financially stressed companies receiving a

going-concern modification in the post-SAS #59 period is

still relatively low22 (i.e. 65% Type II error for financially

stressed companies). Also, Raghunandan and Rama (1995), in

concurrence with Carmichael et al. (1995), concede that the

macroeconomic factors of the post-SAS 59 recessionary period,

with systematically greater financial stress, may have caused

auditors to issue more going-concern modifications, thus

biasing the results. In fact, in a broader study examining

bankruptcy-related opinions23 from 1/1/72 to 12/31/92 (i.e. in

order to compare pre-SAS 34, SAS 34, and SAS 59 periods),

Carcello, Hermanson, and Huss (1995) do not find evidence of

any temporal changes in bankruptcy-related reporting,24

contrary to the results of Raghunandan and Rama.

As Carcello et al. note, the number of years in the SAS

59 period is quite small and empirical research addressing

the effects of SAS 59 is in the beginning stages and

22 For the pre-SAS #59 period, 22% of the financially stressedcompanies received a going-concern modified report. 23 Per Carcello, Hermanson, and Huss (1995), bankruptcy-relatedopinions refer to the last audit opinions given to clients before theirdeclaration of bankruptcy. 24 Note that analysis of a "full" sample that includes audit clientsdeclaring bankruptcy within 15 months of the last audit report (i.e.expanded from one-year time frame of SAS #59) did provide some supportfor an increase in the propensity to modify bankruptcy-related opinionsfrom the pre-34 to the SAS 34 period; however, there was no differencebetween SAS 34 & SAS 59 reporting, utilizing either sample.

Page 15: Jurnal   going concern going where

15

inconclusive. While further research is necessary to

evaluate whether SAS 59 has successfully responded to public

concerns over auditors not providing early distress warning

signals, there is already considerable criticism directed at

the standard’s lack of objective guidance.

Critics of SAS #59 posture that the standard does not

provide the objective, restrictive guidance necessary to

effectively delimit the expectation gap. The "substantial

doubt" criterion of SAS #59 is imprecise.25 Boritz (1991)

concludes that substantial doubt exists when there is a 50-

70% likelihood of occurrence of events which will raise doubt

regarding an entity’s continued existence. Asare’s (1992)

mean probability value of 56.56% for substantial doubt has a

standard deviation of 16.65%. Given the range of

probabilities, the sizeable standard deviation, and the

traditionally subjective nature of assigning probabilities to

the occurrence of events, "substantial doubt" is inexact and

not apt to channel consistency in going-concern

modifications. Additionally, the criterion that going-

concern be evaluated for a period not to exceed one year

beyond the financial statement date severely limits the

auditor’s horizon and precludes the issuance of the early

distress signal that legislators regard as auditor

responsibility. Carmichael and Pany question whether the 12

month period in SAS No. 59 "should ... be viewed as an

Page 16: Jurnal   going concern going where

16

impenetrable barrier to consideration of a known financial

difficulty."26 Carcello et al. (1995) warn that SAS No. 59

may simply have codified current practice, manifesting the

inconsistent going concern audit opinions. "If so, it did

little to narrow the gap between users’ expectations and

auditors’ reporting."27

Message to Standard-Setters

Without a more definitive standard, the auditor is given

the freedom to make either a Type I or Type II error

concerning the going-concern evaluation. However, if the

potential effects of the trade-off between Type I and Type II

error are considered, the message to the auditor and the

standard-setters is clear.

Although the potential "self-fulfilling prophecy" can

negatively impact the auditor-client relationship (i.e. Type

I error effect), the more significant auditor risks are

litigation and reputational effects (i.e. Type II error

effects). As Carcello et al. (1995) note, the costs imposed

on society by issuing a modified opinion to a client that

does not declare bankruptcy are considerably less than the

costs of failing to modify a bankruptcy-related opinion.

Carcello et al. cite studies (e.g. Altman (1977), and

Hopwood, McKeown, & Mutchler (1994)) that indicate

25 Ponemon & Raghunandan (1994). 26 Carmichael & Pany (1993), p. 46.

Page 17: Jurnal   going concern going where

17

significant cost differentials for the misclassification of

bankrupt companies compared to misclassifying healthy firms.28

The client and fee loss associated with Type I error is

predominantly client-specific, without broad ramifications.

Additionally, there is scant empirical evidence that

even suggests the risk of a self-fulfilling prophecy effect.

Citron and Taffler (1992), in a study of UK firms, found

that the likelihood of failure was no greater following a

going concern qualification than it was subsequent to a non-

qualified report. Similarly, Louwers, Messina, and Richard

(1995), utilizing discrete-time survival analysis, find that

while 22% of the companies receiving an initial going concern

disclosure fail in the subsequent year, the firms, on

average, survive over seven years. These findings, combined

with the significant Type I error results of prior studies29

provide evidence regarding the irrelevance, in a negative

direction, of a going-concern distress warning on an audit

client’s future operations; in other words, the going concern

disclosure does not appear to precipitate insolvency.

Moreover, according to Carcello and Palmrose (1994), an

increased frequency of going-concern modifications will

delimit the litigation risks/costs to society.

27 Carcello et al. (1995), p. 141. 28 Altman (1977) estimates a 16.5 to 30 times greater cost ofmisclassifying bankrupt firms; Hopwood et al. (1994) indicate amisclassification cost ratio ranging from 1:1 to 100:1(i.e. misclassifying bankrupt co. cost/misclassifying healthy co. cost). 29 Altman & McGough (1974), Shindledecker (1980), and Altman (1982).

Page 18: Jurnal   going concern going where

18

The message to auditors and standard-setters is that the

critical concern is avoidance of Type II error. In light of

the going-concern opinion inconsistencies, standard-setters

must restrict auditor flexibility and formally incorporate a

more conservative approach that is inclined toward Type I

error.

Recommendation

New auditing standard guidelines for considering "An

Entity’s Ability to Continue as a Going Concern" cannot allow

the subjectivity and inconsistent application of "substantial

doubt," or be constricted by a one-year time horizon. It is

the responsibility of the profession to objectively delimit

the expectation gap by providing early warnings of corporate

financial distress. Continuity can no longer be an assumed

connection between the past and future, but must be evaluated

as a likelihood of continuation.

A more conservative proactive approach requires that the

profession include recognition of the "financial distress

continuum" in its guidelines for considering a going-concern.

When appropriate, the auditor has an affirmative duty to

communicate that a company experiencing an initial distress

signal has the potential to deteriorate financially along a

continuum, starting with milder states of liquidity squeezes

and covenant violations and ending in the extreme states of

Page 19: Jurnal   going concern going where

19

bankruptcy reorganizations and liquidations.30 The

implication for auditor responsibility is one of long-term

prediction.

Models exist and continue to be developed that

statistically predict corporate financial distress as a state

between financial health and bankruptcy.31 Survival analysis,

used extensively in the medical field, has recently been

utilized in accounting research to develop company risk

profiles.32 This statistical technique has particular appeal

as an audit tool that can assign probabilities of survival

based upon firm-specific attributes and succession along the

distress continuum.

The proposal is for revised going-concern audit standard

guidelines that require auditors to communicate their

assessment of firm survivability. Statistical analyses are

to be combined with contextual qualitative factors and

included in the audit report as part of an "Auditor’s

Discussion and Analysis" of a firm’s financial "condition."33

Additional qualitative commentary is consistent with the

recommendation of the AICPA Special Committee on Financial

Reporting (AICPA, 1993) regarding future audit communication.

Additionally, the revised going-concern AUDIT STANDARD

30 Giroux & Wiggins (1983), Foster (1986), & Aksu (1993) document the"financial distress continuum." 31 Wallace (1989); Cormier, Magnan & Morard (1995). 32 Louwers et al. (1995). 33 Price Waterhouse (1985), addressing concerns over business failuressubsequent to a clean opinion, advocated considering financial condition.

Page 20: Jurnal   going concern going where

20

should require discussion addressing "financial flexibility"

and "quality of earnings." Financial flexibility - a firm’s

ability to remedy cash flow squeezes - was included in a

proposed AICPA Statement of Position (1993) entitled

"Disclosure of Certain Significant Risks and Uncertainties

and Financial Flexibility." Although "financial flexibility"

was dropped in the official release of SOP 94-6, it reflects

a firm’s ability to survive moderate distress signals.

Likewise, a "quality of earnings" analysis provides valuable

information regarding sustainable earnings and their affect

on prospective cash flows.

The proposal for a proactive auditor responsibility to

analyze and discuss a firm’s likelihood of financial

distress, though a definite departure from a going-concern

assumption, is necessary in light of the litigious

environment that surrounds audit reporting. The irrelevance

of Type I error, and the concern over Type II error34 attest

to the proposal’s validity.

34 Per Asare & Messier (1993), threat of lawsuit was the only factorassociated with auditor substantial doubt thresholds.

Page 21: Jurnal   going concern going where

21

REFERENCES

Abbott, J. "Accountants’ Precarious Perch." Practical Accountant, January, 1994, pp. 36-42.

Aksu, M. H. (1993). Market response to troubled debt restructuring. Dissertation Abstracts International, DAI-A, 54/08. (University Microfilms No. 94-01651)

Altman, E. I. "The Z-Score Bankruptcy Model: Past, Present, and Future." Financial Crisis: Institutions and Modelsin a Fragile Environment. New York: Wiley, 1977.

Altman, E. I. "Accounting Implications of Failure Prediction Models." Journal of Accounting, Auditing and Finance, Fall, 1982, pp. 4-19.

Altman, E. I. Corporate Financial Distress: A Complete Guide to Predicting, Avoiding, and Dealing with Bankruptcy. New York: John Wiley & Sons, 1983.

Altman, E. I., and T. McGough. "Evaluation of a Company as a Going Concern." Journal of Accountancy, December, 1974, pp. 50-57.

Asare, S. K. "The Auditor’s Going-Concern Decision: A Review and Implications for Future Research." Journalof Accounting Literature, 1990, pp. 39-64.

Asare, S. K. "The Auditor’s Going-Concern Opinion Decision: Interaction of Task Variables and the Sequential Processing of Evidence." The Accounting Review,April, 1992, pp. 379-393.

Asare, S. K., W. F. Messier. "Empirical Evidence on Auditors’ Determination and Use of the ‘Substantial Doubt’ Criterion in SAS 59." Unpublished workingpaper: University of Florida, 1993.

Boritz, E. "The ‘Going Concern’ Assumption: Accounting and Auditing Implications." Toronto, Canada: CICA Research Report, 1991.

Carcello, J. V., D. R. Hermanson, and H. F. Huss. "Temporal Changes in Bankruptcy-Related Reporting." Auditing: A Journal of Practice & Theory, Fall, 1995, pp. 133-143.

Carcello, J. V., and Z. V. Palmrose. "Auditor Litigation and Modified Reporting on Bankrupt Clients." Supplement to Journal of Accounting Research, 1994, pp. 1-30.

Page 22: Jurnal   going concern going where

22

Carmichael, D. R., W. F. Messier, J. F. Mutchler, K. Pany, and J. B. Sullivan. "Communications with Users."Auditing Practice, Research, and Education. (AmericanInstitute of CPAs, 1995), pp. 144-173.

Carmichael, D. R., and K. Pany. "Reporting on Uncertainties, Including Going Concern." The Expectation Gap Standards: Progress Implementation Issues, Research Opportunities. New York: AICPA, 1993, pp. 35-58.

Casey, C. M. "The Usefulness of Accounting Ratios for Subjects’ Predictions of Corporate Failure: Replication and Extensions." Journal of Accounting Research, Autumn, 1980, pp. 603-613.

Chen, K. C., W., and B. K. Church. "Default on Debt Obligations and the Issuance of Going-ConcernOpinions." Auditing: A Journal of Practice & Theory,Fall, 1992, pp. 30-49.

Citron, D. B., and R. J. Taffler. "The Audit Report under Going Concern Uncertainties: An Empirical Analysis." Accounting and Business Research, Autumn, 1992, pp. 337-345.

Cormier, D., M. Magnan, and B. Morard. "The Auditor’s Consideration of the Going Concern Assumption: A Diagnostic Model." Journal of Accounting, Auditing & Finance, Spring, 1995, pp. 201-222.

Ellingson, J. E., K. Pany, and P. Fagan. "SAS no. 59: How to Evaluate Going Concern." Journal of Accountancy, January, 1989, pp. 24-31.

Foster, G. Financial Statement Analysis. New Jersey: Prentice Hall, Inc., 1986.

Fremgen, J. M. "The Going Concern Assumption: A Critical Appraisal." Accounting Review, October, 1968, pp. 649-656.

Gilman, S. Accounting Concepts of Profit, (Ronald Press Co., 1939), p. 205.

Giroux, G., and C.E. Wiggins. "Chapter XI and Corporate Resuscitation." Financial Executive, December, 1983, pp. 36-41.

Page 23: Jurnal   going concern going where

23

Guy, D. M., and Winters, A. J. "Preface." The Expectation Gap Standards: Progress, Implementation Issues,Research Opportunities. New York: AICPA, 1993, pp. iii-v.

Hopwood, W., J. C. McKeown, and J. F. Mutchler. "A Test of the Incremental Explanatory Power of Opinions Qualified for Consistency and Uncertainty." Accounting Review, January, 1989, pp. 28-48.

Hopwood, W., J. C. McKeown, and J. F. Mutchler. "A Reexamination of Auditor Versus Model Accuracy withinthe Context of the Going-Concern Opinion Decision." Contemporary Accounting Research, Spring, 1994, pp. 409-431.

Kida, T. "Investigation into Auditors’ Continuity and Related Qualification Judgements." Journal ofAccounting Research, Autumn, 1980.

Koh, H. C. "Model Predictions and Auditor Assessments of Going Concern Status." Accounting and BusinessResearch, Autumn, 1991, pp. 331-338.

Libby, R. "The Use of Simulated Decision Makers in Information Evaluation." The Accounting Review, July, 1975b, pp. 475-489.

Louwers, T. J., F. M. Messina, and M. D. Richard. "The Auditor’s Going Concern Modification As a Self-Fulfilling Prophecy: A Discrete-Time Survival Analysis."Unpublished working paper, AAA, 1995.

McKeown, J. C., J. F. Mutchler, and W. Hopwood. "Towards An Explanation of Auditor Failure to Modify the Audit Opinion of Bankrupt Companies." Supplement toAuditing: A Journal of Practice & Theory, 1991a, pp. 1-13.

McKeown, J. C., J. F. Mutchler, and W. Hopwood. "Reply." Supplement to Auditing: A Journal of Practice & Theory, 1991b, pp. 21-24.

Menon, K., and K. B. Schwartz. "An Empirical Investigation of Audit Qualification Decisions in the Presence ofGoing Concern Uncertainties." Contemporary AccountingResearch, Spring, 1987, pp. 302-315.

Moonitz, M. The Basic Postulates of Accounting: Accounting Research StudyNo. 1, (American Institute of CPAs,1961), pp. 38-41.

Page 24: Jurnal   going concern going where

24

Paton, W. A. Accounting Theory. Houston: Scholars Book Co., (reprinted, 1973).

Ponemon, L. A., and K. Raghunandan. "What is ‘Substantial Doubt’?" Accounting Horizons, June, 1994, pp. 44-54.

Price Waterhouse. Challenge and Opportunity for the Accounting Profession: Strengthening the Public’s Confidence. New York: Price Waterhouse, 1985.

Raghunandan, K., and D. V. Rama. "Audit Reports for Companies in Financial Distress: Before and After SAS No. 59." Auditing: A Journal of Practice & Theory, Spring, 1995, pp. 50-63.

St. Pierre, K., and J. Anderson. "An Analysis of the Factors Associated with Lawsuits Against Public Accountants." Accounting Review, April, 1984, pp. 242-263.

Sanders, T. H., H. R. Hatfield, and U. Moore. A Statement of Accounting Principles. (American Accounting Association, 1959).

Sprouse, R. T., and M. Moonitz. A Tentative Set of Broad Accounting Principles for Business Enterprises: Accounting Research Study No. 3, (American Instituteof CPAs, 1962), p. ix.

Shindledecker, MC. "Going Concern Reports." NYU, 1980.

Sterling, R. R. "Conservatism: The Fundamental Principle of Valuation in Traditional Accounting." Abacus, December, 1967, pp. 109-132.

Sterling, R. R. "The Going Concern: An Examination." Accounting Review, July, 1968, pp. 481-499.

Wallace, W. A. "An ‘Early Warning’ Signal from the Market: Its Potential as an Audit Tool." Supplement to Advances in Accounting, 1989, pp. 205-231.

Wolk, H. I., J. R. Francis, and M. G. Tearney. Accounting Theory. Cincinnati: South-Western Publishing Co., 1992.