Using a bankruptcy model in the auditing course: The evaluation of a company as a going concern
In order to evaluate whether a company is experiencing a going-concern problem, the auditor must know what information needs to be acquired as well as how to combine that information. Financial Z-score models can be employed as an analytical tool in making a going-concern judgment. These models employ a statistical technique termed discriminant analysis which allows one to combine information into a single measure which is then used to classify a company as either bankrupt or nonbankrupt. This paper describes an activity-based exercise in which students use financial models to make going concern judgments. In addition, the students are exposed to financial databases maintained on CD-ROM. Copyright © 1996 Elsevier Science Ltd.
Paquette, LR; Skender, CJ
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