An Analysis of the Explanatory Paragraphs of Auditors’ Going-Concern Reports and Footnotes of Bankrupt Companies Under SAS No. 59

This paper has two main objectives. The first is to analyze the explanatory paragraphs of the audit opinions and footnotes to the financial statements of 112 US bankrupt companies under SAS No. 59 for the years 2001, 2002 and 2003. The other objective is to present the Going-Concern (GC) conditions and events that were identified under the four categories suggested by SAS No. 59. The sample consists of 36 construction companies and 76 manufacturing companies. The results indicate that the companies in the Non-GC (NGC) group seem to be in a better financial position than the GC group. In terms of timeliness of the audit reports, the GC group comes out better. Also, the GC group discloses more GC conditions and events than the NGC group. Eighty-two companies (73.21%) received a GC opinion while 30 companies (26.79%) received a NGC audit opinion. Seventy-four companies (66.07%) remain active while 38 companies (33.93%) remain inactive. The results suggest that auditors follow the guidelines of SAS No. 59 more closely when issuing a GC opinion.