External audit in the function of providing assurance in the correctness of the assumptions about the going concern assumption

Main Article Content

Sanja Vlaović Begović
Stevan Tomašević
Mirela Momčilović


Expressing confidence in the correctness of the going-concern assumption of the client's company is a complex issue that requires attention. Based on the company's characteristics, auditors may indicate the problem of business continuity, but the uncertainty of future events that may affect the company to initiate or not to initiate bankruptcy proceedings remains. The client and the auditors bear the consequences of expressing a wrong opinion. The aim of the paper is to emphasize the auditor's responsibility in expressing opinions on the principle of the going-concern assumption, as well as drawing attention to the consequences that the auditor's opinion can cause. By reviewing literature and audit practices in different countries, the authors concluded that expressing a modified opinion expressing doubts about the continuation of business directly makes it difficult to conduct its business activities (it is harder to approve loans, find business partners, etc.). In this way, the chances of the company recovery are reduced. On the other hand, expressing an unmodified opinion, following which the client company opens bankruptcy proceedings, causes public dissatisfaction and suspicion in the auditing profession. Although users of financial statements expect an auditor's warning about the company's financial difficulties that lead to the initiation of bankruptcy proceedings, the auditor's responsibility is to express an opinion on whether the continuity of business is endangered and not whether the company will initiate bankruptcy proceedings.


Download data is not yet available.

Article Details

How to Cite
Vlaović Begović, S., Tomašević, S., & Momčilović, M. . (2022). External audit in the function of providing assurance in the correctness of the assumptions about the going concern assumption. BizInfo (Blace) Journal of Economics, Management and Informatics, 13(1), 49–55. https://doi.org/10.5937/bizinfo2201049V


AICPA. The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern. Available at:


Alexeyeva, I., & Sundgren, S. (2021). Do going concern disclosures in the management report and audit report signal bankruptcy risk? Evidence from privately held firms. International Journal of Auditing, 1–22. https://doi.org/10.1111/ijau.12257

Alleyne, P., & Howard, M. (2005). An exploratory study of auditors’responsibility for fraud detection in Barbados. Managerial Auditing Journal, 20(3), 284-303. https://doi.org/10.1108/02686900510585618

Ball, R. (2009). Market and political/regulatory perspectives on the recent accounting scandals. Journal of Accounting Research, 47(2), 277– 323. https://doi.org/10.1111/j.1475-679X.2009.00325.x

Becker, C.L., DeFond, M.L., Jiambalvo, J., & Subramanyam, K.R. (1998). The effect of audit quality on earnings management. Contemporary accounting research, 15(1), 1-24. https://doi.org/10.1111/j.1911-3846.1998.tb00547.x

Blay, A.D., & Geiger, M.A. (2013). Auditor fees and auditor independence: Evidence from going concern reporting decisions. Contemporary Accounting Research, 30(2), 579–606.

Bonić, Lj, Mijić, K., & Jovanović, D. (2019). Improving audit reporting for better auditor interaction with cients and stakeholders. International Scientific Conference Faculty of Economics Niš: Contemporary economic trends: Technological development and challenges of competitiveness (pp. 329-337). Niš: Ekonomski fakultet.

Carcello, J., & Neal, T. (2003). Audit committee characteristics and auditor dismissals following “new” going-concern reports. The Accounting Review, 78, 95-118. https://doi.org/10.2308/accr.2003.78.1.95

Carson, E., Fargher, N. L., & Zhang, Y. (2017). Explaining auditors' propensity to issue going-concern opinions in Australia after the global financial crisis. Accounting and Finance, 57, 1– 39. https://doi.org/10.1111/acfi.12313

Carson, E., Fargher, N.L., Geiger, M.A., Lennox, C.S., Raghunandan, K., & Willekens, M. (2013). Audit reporting for going-concern uncertainty: A research synthesis. Auditing: A Journal of Practice & Theory, 32(1), 353-384. https://doi.org/10.2308/ajpt-50324

Carson, E., Simnett, R., & Trønnes. P.C. (2011). International consistency in audit reporting behaviour: Evidence from going concern modifications. Report to International Auditing and Assurance Standards Board.

Casterella, J.R., Lewis, B.L., & Walker, P.L. (2000). Modeling the audit opinions issued to bankrupt companies: a two‐stage empirical analysis. Decision Sciences, 31(2), 507-530. https://doi.org/10.1111/j.1540-5915.2000.tb01632.x

Cheffers, M., Whalen, D., & Thrun, M. (2010). 2009 Going Concerns: A Ten-Year Review. Sutton, MA, Audit Analytics.

Chi, W., Douthett Jr, E. B., & Lisic, L. L. (2012). Client importance and audit partner independence. Journal of Accounting and Public Policy, 31(3), 320-336. https://doi.org/10.1016/j.jaccpubpol.2011.08.009

Choi, J.H., Kim, J.B., & Zang. Y. (2010). Do abnormally high audit fees impair audit quality? Auditing: A Journal of Practice & Theory, 29(2), 115–140. https://doi.org/10.2308/aud.2010.29.2.115

Cook, K. A., Kim, K., & Omer, T. C. (2020). The cost of independence: Evidence from companies’ decisions to dismiss audit firms as tax-service providers. Accounting Horizons, 34(2), 83–107. https://doi.org/10.2308/horizons-18-009

Desai, V., Desai, R., Kim, J. W., & Raghunandan, K. (2020). Are going‐concern issues disclosed in audit reports associated with subsequent bankruptcy? Evidence from the United States. International Journal of Auditing, 24(1), 131-144. https://doi.org/10.1111/ijau.12183

Doogar, R., Sivadasan, P., & Solomon, I. (2015). Audit fee residuals: Costs or rents? Review of Accounting Studies, 20(4), 1247-1286. https://doi.org/10.1007/s11142-015-9322-2

Đurić, D., & Jovanović, V. (2019). “Too big to fail”? The Agrokor case and its impact on West Balkan economies. International Insolvency Review, 28(1), 22-43. https://doi.org/10.1002/iir.1327

Francis, J.R., Maydew, E.L., & Sparks, H.C. (1999). The role of Big 6 auditors in the credible reporting ofaccruals. Auditing: a Journal of Practice & theory, 18(2), 17-34. https://doi.org/10.2308/aud.1999.18.2.17

Geiger, M. A., & Kumas, A. (2018). Anticipation and reaction to going‐concern modified audit opinions by sophisticated investors. International Journal of Auditing, 22(3), 522-535. https://doi.org/10.1111/ijau.12135

Geiger, M. A., & Rama, D. V. (2006). Audit firm size and going-concern reporting accuracy. Accounting Horizons, 20(1), 1-17. https://doi.org/10.2308/acch.2006.20.1.1

Gutierrez, E.F., Krupa, J., Minutti-Meza, M., & Vulcheva, M. (2019). Are Going Concern Opinions Useful in Predicting Client Defaults? SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.2910604

Hoang, K., Jamal, K., & Tan, H.T. (2019). Determinants of audit engagement profitability. The Accounting Review, 94(6), 253-283. https://doi.org/10.2308/accr-52438

Hodžić, N., & Gregović, N. (2016). Značaj revizorskog mišljenja za ekonomske odluke eksternih korisnika finansijskih i revizorskih izveštaja korporacije. Ekonomski izazovi, 5(9), 114-125.

IAASB. (2016). International Standard on Auditing (ISA) 570 (revised), Going Concern. paragraph 6. Available at: https://www.ifac.org/system/files/publications/files/ISA-570-(Revised).pdf

Jakšić, D., & Mijić, K. (2017). The determinants of audit reporting on going concern. Anali Ekonomskog fakulteta u Subotici, 53(37), 187-196.

Jakšić, D., Mijić, K., & Andrić, M. (2012). Analysis of variations in the performance of audit firms in the Republic of Serbia. Economic Annals, 57(193), 71-91. https://doi.org/10.2298/EKA1293071J

Jovanović–Škarić, K. Računovodstvo – instrument izvršenja i otkrivanja prevara. Available at: https://ef.unibl.org/literatura/779942prevare_u_racunovodstvu-_teslic_jun06.do.doc

Kennedy, D.B., & Shaw, W.H. (1991). Evaluating financial distress resolution using prior audit opinions. Contemporary Accounting Research, 8(1), 97-114. https://doi.org/10.1111/j.1911-3846.1991.tb00837.x

Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of accounting and economics, 33(3), 375-400. https://doi.org/10.1016/S0165-4101(02)00059-9

Lai, K. W. (2021). Separation of tax service from audit service, going‐concern opinions, and discretionary accruals. Journal of Corporate Accounting & Finance, 33(2), 13-30. https://doi.org/10.1002/jcaf.22532

Law on Audit, RS Official Gazette, No 73/2019.

Malone, C.F., & Roberts, R.W. (1996). Factors associated with the incidence of reduced audit quality behaviours. Auditing: A Journal of Practice &Theory, 15(2), 49–64.

Mareque, M., López-Corrales, F., & Pedrosa, A. (2017). Audit reporting for going concern in Spain during the global financial crisis. Economic research, 30(1), 154-183. https://doi.org/10.1080/1331677X.2017.1305787

Menon, K., & Williams, D. D. (2010). Investor reaction to going concern audit reports. The Accounting Review, 85(6), 2075– 2105. https://doi.org/10.2308/accr.2010.85.6.2075

Mijić, K., & Rađo, D. (2021). Profitability Analysis of Audit Firms–Evidence from the Republic of Serbia. ENTRENOVA-ENTerprise REsearch InNOVAtion, 7(1), 273-282. https://doi.org/10.54820/entrenova-2021-0025

Mizdraković, V., Stanić, N., Mitić, V., Obradović, A., Kljajić, M., Obradović, M., & Stanišić, N. (2020). Empirical Data on Financial and Audit Reports of Serbian Business Entities. In: FINIZ 2020-People in the focus of process automation (pp. 193-198). Belgrade: Singidunum University. https://doi.org/10.15308/finiz-2020-193-198

Obradović, A., Mizdraković, V., & Avlijaš, G. (2018). Analysis of Audit Report Lag on Serbian Stock Exchange. In: Finiz 2018 - The Role of Financial and Non-financial Reporting in Responsible Business Operation (pp. 113-117). Beograde: Singidunum University. https://doi.org/10.15308/finiz-2018-113-117

Schilit, H., & Perler, Ј. (2010). Financial shenanigans. Third edition. McGraw-Hill Education.

Stanišić, N., Petrović, Z., Vićentijević, K., & Mizdraković, V. (2014). Auditor switching and qualified audit opinion: evidence from Serbia. In: The first international Conference Sinteza (pp. 1-8). Belgrade: Singidunum University.