Analysis of Going Concern Presumption for Investment Firms – A Challenge for Auditors in the Context of Financial Crisis
Author:
Prof.Univ.PhD. Tatiana DĂNESCU, Univ. Lecturer PhD Student Ovidiu Ioan SPĂTĂCEAN
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DOI:
Keywords:
investment firm, going concern presumption, capital adequacy, financial crisis, professional scepticism, analytical procedures
Abstract:
The dimensions of the globalization process related to capital markets favored the instant propagation of the financial crisis`s effects, raising serious questions about the survival of reputable operators in the financial banking industry. Famous bankruptcies reported in the United States financial services and banking sector caused financial shocks characterized by an intense magnitude that have been amplified on a international scale, requiring costly recovery plans to rescue the financial services industry from the devastating effects caused by the global crisis.\r\nThese realities that occurred in capital markets area justify the approach of the scientific research accomplished to analyze the going concern presumption for investment firms, when auditing financial statements, provided that International Standards on Auditing establish a professional requirement in this regard.\r\nThe paper`s objectives aim to achieve a critical assessment of the events and conditions that are inherently uncertain and throw a shadow of doubt on the going concern presumption for investment firms, as well as on adequacy level associated to the manner in which those in charge with governance within investment firms proceed to specific assessment upon the entity`s ability to continue generating business. The main objective is to emphasize multiple possibilities to develop a specific analyze on the issue that is investigated, as well as to underline its pronounced applicative nature.\r\nThe contributions this paper brings are materialized in application of analytical procedures for testing key financial indicators specific to investment firms, for the purpose of enabling the auditor to collect relevant audit evidence to support the conclusions regarding the existence of significant doubts related to going concern presumption. Results based on such professional judgment can be materialized in a systematic and detailed approach for the assessment of going concern presumption related to investment firms.\r\n