engleski

AUDITOR'S GOING CONCERN ASSESSMENT IN THE REPUBLIC OF CROATIA

Going concern (GC) is a basic assumption of accounting theory and practice. In the Republic of Croatia, the application for the GC assumption is within the framework of Croatian Financial Reporting Standards and International Financial Reporting Standards. In accordance with accounting standards, the applicability of the GC assumption in financial statements must be assessed by the company management, whereas, based on International Auditing Standard 570 (Revised), the auditor has to assess the truth and the objectivity of the management's evaluation. In scientific research GC reporting is considered to be a direct measure of audit quality and usually is defined as a likelihood of the auditor to express doubts about GC to financially distressed companies. This research provides a comprehensive overview of the published scientific and professional papers in which the audit quality is considered. Additionally, a primary research has been conducted on a sample of 102 certified auditors in the Republic of Croatia with the aim of examining the experience of auditors assessing GC and the financial and non-financial factors they depended on during the process. The results of the research carried out show that the auditors who have more than 10 years of work experience engage in assessing GC. Most respondents agreed that the assessment calls for a high level of the auditor's competence and that they are aware of potential consequences of the wrong decision. Regarding financial factors, they rely upon when assessing GC, they rated debt ratio, current ratio and the share of working capital in total assets as the top three factors for this assessment. Non-financial factors are overall considered less important. They only stressed the factor of bank account blockade. The results of this research have the potential to help auditors and management focus on the most relevant factors in a GC assessment.

audit quality ; auditing reporting ; external audit ; going concern (GC) assessment

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