Practitioner Economists and Business Men Thesis

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It is useful to look at the general state of the economy and assess how this could impact the entity of interest. The general theory is that "in the absence of evidence to the contrary, […] the business will continue to trade in the normal way into the foreseeable future. This enables the account to assume that stock will eventually be sold, that fixed assets will continue to be used, and so on" (Alexander and Britton, 2004).

A relevant example for this scenario is given by the situation encountered throughout the past two years within the American automobile industry. The market was on the one hand characterized by a growing customer focus on small size vehicles incorporating fuel efficient engines. This situation occurred due to the impending occurrence of a global crisis and the scarcity of natural resources. At an industry level, the Japanese manufacturers were able to foresee these needs and serve them, even within the United States. The national producers however, were not able to do so. If one had looked at the macro-environment in which Ford operated, they could have come to the realization that the American automobile manufacturer was far from being a going concern.

In terms of a gradual and succinct presentation of the measures which have to be undertaken in order to identify the existence of a going concern, the auditor has to engage in the following actions:

identify and analyze any existent or potential risks which could influence organizational operations and results get rapid access to all financial statements and other organizational documents remain objective and detached in order to most effectively and efficiently assess organizational documents engage in open communications with the managerial team and accurately review their input assess the future of the company as it is presented and estimated by the managerial team in some cases, the internal auditors of the assessed company have already conducted analyses and identified the determinants of going concerns; it is crucial to assess these reports as well pay attention to all forces indicative of going concerns or risks, such as financial difficulties, operating troubles (high employee turnover rates, lack of adequate technologies etc.), failure of compliance with statutory requirements and so on (the Institute of Certified Public Accountants in Ireland)

5. Conclusions

In the context of a growingly dynamic market and industry, economic agents are obliged to remain alert and identify those categories of stakeholders which will be able to support long-term fruitful relations.

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In support of this endeavor comes the classification of organizations as going concerns. Basically, a going concern represents an organization which stands the most chances of conducting business in the future in the same manner as today, without suffering losses. History has provided us with numerous examples of companies which were or were not going concerns, the two most representative members of each category being Nike Inc., WorldCom respectively. The identification of a going concern is a generally complex challenge and involves sustained processes of audit and analysis of the surrounding environment......

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