Factors with Impact on Assessment of Continuity of the Company’s Business in Audit

Abstract

Indicators of company’s performance and their typical modifications are studied, which may indicate a risk of noncompliance with the assumption on continuity of the company’s business in preparing financial statements by management personnel in the audit. Emphasis is made on the dependence of the termination probability on the cumulative impact of unjustified managerial decisions, wasteful disposal of funds and ineffective marketing strategy. External and internal risk factors are distinguished; combinations of factors most common for contemporary companies are highlighted. Risks of termination, caused by market conjuncture and innovation are emphasized. Signs of insignificant risk of termination are outlined. The conclusion is made than although the mix of factors for the occurrence of risk for termination of company’s business is company-specific, internal factors of risk tend to reinforce the impact of external factors. Although crisis in a company can be triggered by any of the abovementioned factors, the strongest ones are administrative factors. Low effectiveness of management needs be seen as the most common problem for contemporary companies, which declines their market performance.