Rolling the Dice with Internet IPOs

SAS 59 requires the auditor to assess whether there is substantial doubt about the entity's ability to remain a going concern on every engagement. This assessment is especially critical with Internet IPOs. Auditors may wish to use a going concern opinion to protect themselves against litigation...

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Bibliographic Details
Published in:Ohio CPA Journal 2000-07, Vol.59 (3), p.83
Main Authors: Weatherholt, Nancy D, Cornell, David W
Format: Article
Language:English
Subjects:
Accounting
Analysis
Audit risk
Auditing standards
Auditors
Business plans
Finance
Financial statements
Going concern assumption
Going public (Securities)
High tech industries
High technology industry
Initial public offerings
Internet stocks
Litigation
Net losses
Revenue recognition
Risk (Economics)
Risk factors
SAS 59
Statements on auditing standards
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Summary:SAS 59 requires the auditor to assess whether there is substantial doubt about the entity's ability to remain a going concern on every engagement. This assessment is especially critical with Internet IPOs. Auditors may wish to use a going concern opinion to protect themselves against litigation. Investors, relying on the financial statements but often responding to the supply and demand aspects of the marketplace, may well bid shares up to high levels in the early aftermarket such that some will suffer losses on their investment when share prices retreat to a more reasonable level. Auditors must be comfortable with representations made by management in the financial statements, and they should be conservative in their decisions about the type of report they render in association with the financial statements.
ISSN:0749-8284