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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 1234567890 AudS 8987654321