Evaluating continued existence

Under current auditing standards, companies can become bankrupt immediately following their receipt of a clean audit opinion from their auditors. The public, however, believes that auditors should report on the likelihood of the audit client's being able to continue in business; in fact, some believe the auditors should act as an early warning system, announcing in their audits whenever they have reservations about the continuity of a client. Research into 80 companies that received audit opinions expressing doubt as to their ability to continue to operate has produced a profile of troubled companies. It is suggested that this profile could form the basis for continuity evaluations, when (and if) such evaluations become a mandatory part of the audit process.