In her article ” The Going-Concern Assumption Revisited: Assessing a Company’s Future Viability”, the author Elizabeth K.Venuti explains the reasons why auditors report auditee as going concern even though there are some risks that the auditee might go bankrupt in the coming year.
One of the main reasons behind the fact some auditors are reluctant to disclose any negative information is the “self-fulfilling prophesy” according to Professor Venuti. This concept states that auditors believe that reporting any problems or failures about the company will influence investors’ decisions and therefore impact the company.
Hence, the auditors refrains themselves to comply and express their own opinions. Moreover, the auditors are sometimes reluctant to highlight any issues regarding the auditee due to the fact that they got paid by the auditee and they do not want to lose the business relationship on the long term.
In my opinion, SAS-59 is very effective because it allows the public and investors to know the real situation of the company. The problem comes from auditors who do not act as “referees” and comply with the SAS-59. If every auditors would be assessing fairly every auditee, there would be no problems regarding the solvability of companies. Hence, it will bring more discipline to managers’ behavior and less companies will go out of business.
