As part of GAAP audit, requires auditors to evaluate whether substantial doubt exists about the entity's ability to continue as a going concern for a reasonable period of time

Typically assessed for no more than a one year time horizon beyond the date of the financials being audited

If there is substantial doubt, must be disclosed in audit report

Superceded SAS 34, which required auditor to assess going concern status only when contrary information was discovered during the audit

Disclosure Requirement

Requires companies to use news media to disclose
going concern audit opinions

"Legislative history"

Disclosure in auditor's report that there is substantial doubt can be characterized as qualifying the opinion, or instead as being merely explanatory

Distinction can be relevant to covenants which require delivery of an unqualified auditor opinion

Spiegel Inc (2003)

• SEC litigation release (3.07.03)
• SEC complaint (3.07.03)
• SEC charges Spiegel Inc with fraud for failing to disclose auditor's going concern
• German billionaire Michael Otto, an 89% shareholder, settles creditor civil claims for $104 million (Feb 2005)

Trump Hotels & Casino Resorts Inc

• Auditor's report
• Proposed recapitalization

Accounting Issues

Audits / Auditors

MD&A (Liquidity)