Surfer Dude Duds, Inc.

Case 12.4

Auditing II
ACG 4642-Spring 2011
By
Rick Woo

1. What are Mark’s option?

Mark’s option is to include an explanatory paragraph about Surfer Dude Duds, Inc.’s going concerns. SAS 59 requires an auditor to evaluate conditions or events discovered during the engagement that raise questions about the validity of the going-concern assumption. An auditor who concludes that substantial doubt exists about the entity’s ability to continue as a going concern and who is not satisfied that management’s plans are enough to mitigate these concerns is required to issue a modified (but unqualified) report. It is also the duty for Mark to convince George about the financial position of his company’s going
It also would put Mark’s independent toward Surfer Dude into questions. 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?

It is necessary that the auditor and the company reports full disclosure of information in the audit report. This is because the audit report acts as an ideal way of getting to know the financial status of the company. It is the responsibility of the organization to provide full and correct information to the auditor which in turn helps the auditor to prepare correct report. If the company does not provide the correct accounts, it will be held liable. If the auditor despite knowing the fact that the financial information is not correct and he prepared a report in favor of the company he will be held liable by the court of law. Therefore it is essential that the parties involved in auditing provide a true report. Mark might convince George by telling him the consequences of not including the going concern report. Mark should also convince George to come up with