Case Study Assignment

Case Assignment Study

Renee Bemis

ACC/492

Ding Hardin

November 16, 2015

Case Assignment Study

1. What are Mark’s options?

There really are not any options for Mark except to let Surfer Dude know that he does not feel in his professional opinion that the company is going to survive and that he has no choice but to issue a going-concern.

2. How might a going-concern explanatory paragraph become a “self-fulfilling prophecy” for Surfer Dude?

The reason that this statement might become a “self-fulfilling prophecy” for Surfer Dude is that by having that paragraph on their financial statements it is saying that the company is financially in trouble and more than likely will not be able to pay for their bills. So by having that statement on the financials no company is going to be willing to lend Surfer Dude credit.

3. What potential implications arise for the accounting firm if they issue an unqualified report without the going-concern explanatory paragraph?

If the accounting firm does not issue a going-concern explanatory paragraph and the company starts to falter when it comes to paying their creditors and the accounting firm knew that this would happen, then the accounting firm can be held accountable for not doing their due diligence by putting the going-concern at the bottom of the financial statements to ensure that any company who is looking at Surfer Dude has all the information in order to make any informed decision.

4. Discuss the importance of full and accurate auditor reporting to the public, and describe possible consequences for both parties if the going-concern explanatory paragraph and footnote are excluded. How might Mark convince George that a going-concern report is in the best interests of all parties involved?

If Mark does not properly and fully disclose the going-concern that Surfer Dude has it could mean that any creditor that looks at the report will think that the company is doing okay and lend Surfer Dude credit to find...