The going concern assumption is important nowadays in the business field. Indeed, the accuracy at which the auditor will be able to announce the future of a firm, the more they will reduce the gap that exist between the auditors and the owners of firms. In fact, the gap is …
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The going concern assumption is important nowadays in the business field. Indeed, the accuracy at which the auditor will be able to announce the future of a firm, the more they will reduce the gap that exist between the auditors and the owners of firms. In fact, the gap is that the general public think that auditors are absolutely capable to confirm that a firm is going to operate in the foreseeable future or to collapse. Therefore, a firm should not collapse just after the auditor has given an unqualified report, but auditors think that so many things can happen after the audit, and the firm may collapse just after an unqualified report has been released for that firm. Apart from the opinion about the true and fair view of financial statement, auditors are responsible to speak on the going concern of firm in their report. Thus, the importance of the understanding of the going concern concept and the way it is assessed by auditors. The researcher assessed the efficacy of auditors in Ghana in the prediction of going concern and the elements on which they bear on to arrive at their result. To achieve that, the quantitative method was used, and the semi-structured questionnaire has helped to gather data. Descriptive statistic was used to analyze the data with the help of SPSS application. The sample at the beginning was 100. Finally, only 10 practitioners made themselves available. However, that does not affect the relevance of the finding. It was found that auditors in Ghana are using the financial performance indicators on which we have made the research. Those indicators are Current Assets Ratio, Revenue on Asset Rate, Profit Margin Rate, Leverage Rate, Operating Margin Rate, Revenue Growth rate and Capital Intensity Rate. It was revealed by the result that the Capital Intensity Rate is negatively correlated to the going concern status of firms, while the Profit Margin Rate, the Return On Asset Rate, the Liquidity Rate, the Current Asset Ratio, the Operating Margin Rate and the Revenue Growth Rate are positively correlated to the going concern of firm, even if the correlations are with different degrees or levels, in each situation. The first objective of this study was to find out if auditors in Ghana use financial performance indicators in the evaluation of going concern. From the results obtained, it is 100% clear that the performance indicators are essential factors used by auditors in Ghana in the evaluation of firms’ going concern. The second objective was to ascertain the relationship that exist between these indicators and the going concern of firms. As examined above, the financial performance indicators identified by this study include Current Assets Ratio, Revenue On Asset Rate, Profit Margin Rate, Leverage Rate, Operating Margin Rate, Revenue Growth Rate and Capital Intensity Rate are very crucial indicators for the stability of an entity. 100% of the respondents that is 10 people confirmed that the capital intensity is negatively correlated to the going concern status of firms, while the profit margin rate, the return on asset rate, the liquidity rate and the current asset ratio are positively correlated to the going concern of firm, even if the correlations are with different degree or level in each situation. The third objective aimed to ascertain the accurate and efficacy of auditors in the prediction of firms going concern. The study found that the auditors in Ghana have been so far able to predict the status of the firm. Indeed, to all firms that auditors have given the going concern status, only 3 have collapsed later which is almost 5% of the number of firms that has received the going. Finally, we found that auditors in Ghana have been so far able to predict the going concern status of the firm.However, some recommendations have been given such us Government should make some advertisement about the accurate efficacy of auditors in predicting the going concern status of firms since according to the code of auditors they are not permitted to do any advertisement. And auditors should, as much as they can, increase the number of financial indicators they will use in the ascertainments of firms’ going concern status since these indicators are crucially linked to the stability of firms. Finally, for future research, the study recommends that the collection of at least 10 financial statements of entities which are doing well and 10 financial statement of entities which are struggling to ascertain the efficacy of audit in the prediction of going concern status.
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