Reviewing the Theoretical Contradiction of Going Concern (Auditing Standard No. 57) with Views of Independent Auditors

Abstract:Given that the auditing standards in Iran are the translated versions of international auditing standards entirely, and their mismatch with the business context in our country because each countryʹs laws cannot be fully compatible with business context of other countries, and also due to lack of auditing culture, lack of attention to the raison dʹêtre of auditing, and other problems and challenges, there has been a gap between theatrical level and views of the independent auditors with regard to full implementation of auditing standards. Hence, finding the origins of and bridging the gaps between theoretical level and views of independent auditors, and providing solutions for implementation of auditing standards for the purpose of improving the quality of auditing and auditing organizations seem to be necessary. Among these, Auditing Standard No. 57 (going concern) can be pointed to which has been studied here. Generally, going concern means that the audited entity will continue to exist in the foreseeable future - usually for a period of one year after the end of the fiscal period, i.e. no intention or obligation for liquidation of the business entity or significant reduction in its amount of operations is assumed for preparation and presentation of financial statements. In this study, 6 major criteria affecting going concern were derived from Auditing Standard No. 57 including: unfavorable key financial ratios, greater total debts than total assets, failure to pay accounts payable in a timely manner, higher cash outflows than cash inflows from operating activities and major operating losses were considered as 6 hypotheses of contradiction of going concern (Auditing Standard No. 57) with the views of independent auditors and were subsequently tested. Each hypothesis was tested using some questions from a questionnaire for Likert scale, and finally the questionnaires were collected and tested using chi-square test which is a nonparametric test, by means of SPSS software programs. All hypotheses regarding the relationship between the factors influencing the going concern were not rejected and thus were accepted in this study. And finally it can be concluded that there is no theoretical contradiction between Auditing Standard No. 57 (going concern) and the views of independent auditors.