Entity A had an excellent year with record profits. However, Entity A experienced an unanticipated and significant downturn after the reporting period, but before the financial statements were authorized for issuance. The downturn was very severe and casts doubt on the ability of the entity to continue. Management must assess this event and determine the appropriateness of the going concern assumption for last year's financial statements.

Question

Quizplus · Accepted Answer

Management must assess all available information up to the date the financial statements are authorized for issue, including post-reporting period events, to determine the appropriateness of using the going concern assumption. If an event after the reporting period casts significant doubt on the entity's ability to continue as a going concern, it may need to be disclosed in the financial statements.

Entity a Had an Excellent Year with Record Profits