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TRUE OR FALSE? If the auditor discovers that management tends to liquidate the entity,the going concern...

TRUE OR FALSE?

If the auditor discovers that management tends to liquidate the entity,the going concern basis is inappropriate.

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Answer #1

Going concern concept implies that the business entity will continue its operation in the future and it will not be liquidated due to any reason or it will not discontinue its operation. The objective of this concept is to provide that the operation of the business is aline with its objective and there are no chances that it will discontinue any of its operation or liquidate .

If the auditor discovers that management tends to liquidate the entity this will hamper the going concern concept and therefore the auditor should report it in a negative way in its audit report.

Therefore the auditor should give its opinion that the going concern basis is inappropriate. Therefore it's true.

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