Statement on auditing standards, 034

              Statement on
Auditing Standards
Issued by the Auditing Standards Board
AICPA American Institute of
Certified Public Accountants
March 1981
34
The Auditor's Considerations
When a Question Arises About
an Entity's Continued Existence
1. When the continued existence of an entity is imperiled, there is
heightened concern about the recoverability and classification of
recorded asset amounts and the amounts and classification of liabili­ties.
This Statement provides guidance regarding the auditor's con­siderations
when information comes to his attention that raises a
question about an entity's ability to continue in existence. 1
2. Ordinarily, such a question relates to the entity's ability to con­tinue
to meet its obligations as they become due without substantial
disposal of assets, restructuring of debt, externally forced revisions
of its operations, or similar actions. Other factors, not presently
involving solvency, may also bring into question an entity's ability to
continue in existence ( for example, loss of key personnel, principal
customer, essential supply source, or primary revenue producing
assets).
1This Statement does not apply to an examination of financial statements based
on the assumption of liquidation ( for example, when ( a) an entity is in the
process of dissolution or liquidation, ( b) the owners have determined to com­mence
dissolution or liquidation, or ( c) legal proceedings, including bankruptcy,
have reached a point at which dissolution or liquidation is probable).
Copyright © 1981 by the
American Institute of Certified Public Accountants, Inc.
1211 Avenue of the Americas, New York, N. Y. 10036
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