Can City Hall go broke? The going concern issue

Statement on Auditing Standards (SAS) 34 states that, in forming an opinion on financial statements, auditors should take into account any information that comes to their attention that is contrary to the going concern assumption. It is suggested that SAS 34 is directly applicable to government audi...

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Bibliographic Details
Published inJournal of accountancy Vol. 157; no. 5; p. 90
Main Authors Winckler, Susan W, Ward, D Dewey
Format Magazine Article
LanguageEnglish
Published New York American Institute of Certified Public Accountants 01.05.1984
Subjects
Auditing standards
Auditors
Audits
Factors
Financial ratios
GAAS
Going concern assumption
Going concerns
Government
Government agencies
Governmental accounting
Liabilities
Local
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Summary:Statement on Auditing Standards (SAS) 34 states that, in forming an opinion on financial statements, auditors should take into account any information that comes to their attention that is contrary to the going concern assumption. It is suggested that SAS 34 is directly applicable to government audits because the key concept involved is the ability to meet payment obligations as they come due. Government audits should be performed in accordance with generally accepted auditing standards (GAAS), as well as the additional standards set forth by the General Accounting Office. The determination of whether a client has a going concern problem and whether there are mitigating factors and management plans sufficient to offset the problem requires an informed judgment by the accountant. While mitigating factors are usually limited for government units, there are several factors that may help mitigate contrary information seen in local government clients. These include: 1. reduction or deferral of expenditures, 2. state assistance, 3. a strong financial manager, 4. long-term plans, and 5. ability to raise taxes.
ISSN:0021-8448
1945-0729