Circumstance 12. 5: Surfer Girl Duds, Incorporation.: Considering the Going-Concern Assumption* *This case was prepared by Indicate S. Beasley, Ph. G. and Outspoken A. Buckless, Ph. Deb. of New york State College or university and Steven M. Glover, Ph. D. and Douglas F. Prawitt, Ph. D. of Brigham Young School, as a basis for discussion in the classroom. The case was inspired simply by discussions with Craig Isom, a former audit partner, and we gratefully recognize his contribution to its development. Web surfer Dude Time wasters is a fictitious company. All characters and names showed are make believe; any likeness to existing companies or perhaps persons is purely coincidental. Mark S. Beasley, Outspoken A. Buckless, Steven M. Glover, Douglas F. Prawitt Learning Goals
After completing and discussing this case, you should be able to вЂў Understand the difficulty of assessing the client's going-concern assumption вЂў Describe the " self fulfilling prophecyвЂќ aspect of a going-concern modified auditor's report вЂў Identify elements that encourage objective auditor decision despite the presence of friendly client-auditor relationships Background
Tag glanced up at the clock on his workplace wall. It read two: 30 S. M. He previously scheduled a 3: 00 P. Meters. meeting with George " Hang-tenвЂќ Baldwin, chief executive officer of Surfer Dude Duds, Inc. Surfer Dude centered on selling clothing and accessories popularized by California " surferвЂќ lifestyle. Mark had served while audit partner on the Surfer Dude Duds audit within the past six years and was about ready to wrap up this year's engagement. He enjoyed a solid client romance with George Baldwin, who was ordinarily a relaxed and easygoing person, now occurring 50 years of age. For several years, Tag had received a personal invite from George to attend a special Christmas get together held only for George's workers and close associates. Mark considered George a good friend. In his 6 years around the audit, Draw had hardly ever had virtually any reason to offer anything but a clean taxation opinion to get Surfer Dude Duds, Inc. But this year was several. The economy was at a mild recession, and given the faddishness of clothing trends, Surfer Dude's price tag chain was hurting. Because sales lowered, Surfer Girl was struggling to meet almost all its financial obligations. Retail analysts foresaw ongoing hard times pertaining to clothing stores in general, and current fashion trends did not appear to be moving in Web surfer Dude's path. As a result, Draw was beginning doubt Web surfer Dude's capability to stay in business through the the coming year. In fact , after conferring with all the concurring spouse on the audit, Mark was reluctantly with the addition of the going-concern explanatory paragraph to the audit report. When Tag broached this possibility with George days ago, George brushed him off. The goal of the scheduled 3: 00 meeting was to inform George of the decision to issue a going-concern report and also to discuss the footnote disclosure of the issue. Mark rehearsed what he was going to say several times, but he remained uneasy regarding the task before him. When ever Mark found George Baldwin's office, a secretary greeted him and told Mister. Baldwin of Mark's arrival. When Mark heard George say, " Send him in, вЂќ he got a profound breath and headed into George's business office with a laugh on his deal with. George was sprawled in a large exec chair, with his ever-present smile. Mark constantly marveled at exactly how a person could inevitably seem therefore relaxed and happy. " Hey Tag, what's up? You understand I dislike meetings in Friday afternoons, вЂќ George yawned. " Well George, I'll acquire right to the idea. As you well know, the retail clothes market has really gone southern the past few a few months. I know My spouse and i don't need to tell you that Surfer Dude can be struggling at the moment. вЂќ " I know, but we'll pull out of it, вЂќ George was adamant. " When you fall off, you have to climb back on to ride the next huge, right? We all always find a way to come out on top. We all just need to drive this one out, just like the sometimes we've battled. вЂќ " George, My spouse and i...
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