Who is responsible for determining whether the entity is a going concern?

• A. Management
• B. Auditor
• C. Shareholders
• D. Bank

Answer: (A)

Determining whether the entity is a going concern is the responsibility of management. They prepare the financial statements and must assess whether the entity can continue operating and meet obligations for at least 12 months after the reporting date, using evidence like cash flow projections, budgets, debt covenants, and available financing. If there are material doubts, management should disclose them and apply the going concern basis unless liquidation is imminent. The auditor’s role is to evaluate management’s assessment and disclosures, gather evidence, and form an opinion on the financial statements’ presentation of going concern. Shareholders and banks aren’t responsible for making this determination in the accounting sense.