A Practical Model for Testing the „Going-Concern” Assumption in the Financial Audit Engagement for Romanian Quoted Companies
Author:
Mihaela-Alina ROBU, Ph. D. Student; Univ. Prof. Marilena MIRONIUC, Ph. D.; Ioan-Bogdan ROBU, Ph. D. Student
JEL:
C38, C58, C63, M42
DOI:
Keywords:
going concern, multiple discriminant analysis, score function, economic and financial indicators
Abstract:
In a world without borders, growing, the need for certified information becomes increasingly stronger, being considered the main means of control of economic activity. Moreover, currently, the need arise from global financial crisis which makes it impossible to respect the going-concern concept. Providing such information cannot be achieved without the fundamental contribution that accounting has on script transposition of reality and financial audit.\r\nThus, going concern can be evaluated or tested by the financial auditor through various methods and tools applied to annual financial statements. This analysis is done both through accounting methods, the analysis of liquidity, solvency and financial balance and using statistical methods.\r\nThe study aims to provide a bond between an entity`s failure to comply with the presumption of continuity of operations and certain economic and financial indicators and obtaining a score functions useful for classifying firms into groups with different degrees of risk of bankruptcy (bankruptcy risk firms, low-risk business environment and business bankruptcy with high bankruptcy risk). The mathematical model was determined based on a sample of 60 industrial companies, listed on the Bucharest Stock Exchange for the year 2008. To obtain the results was used the statistical tool SPSS 19.0 and the working methods were: principal component analysis and multiple discriminant analysis.\r\n