Going Concerns – An Eighteen Year Review

In our latest report, 2017 Going Concerns: An Eighteen Year Review, we examine the trends and statistics of going concern audit opinions filed with the Securities and Exchange Commission since 2000.

This report analyzes going concern totals and percentages of total opinions by year, with a further breakdown of new and repeat going concerns, as well as the issues which undermine these assumptions.

The analysis seems to provide positive news for going concern opinions. Fiscal year 2017 is expected to have 1,895 going concern opinions, representing the lowest total number and percentage of going concern opinions since 2000. The amount of going concerns has been steadily declining since peaking in 2008 with 3,357 going concern opinions. However, further analysis reveals that part of the reason behind the decrease from 2016 to 2017 can be attributed to the disappearance of companies between years – either due to a company’s termination of registration with the SEC, going private, or going out of business.

For additional insight on going concern trends, going concern opinions were divided into companies with a repeat going concern from the previous year and companies with a “new” going concern (those that did not have a going concern opinion from the previous year). As seen in the graph below, for fiscal year 2017 the number of new going concerns is estimated to be 460, the lowest number during the seventeen years analyzed, and the seventh consecutive year having an amount less than 600.

Looking closer at the effects of company attrition on going concern opinion trends, Audit Analytics identified companies that filed a going concern in one or more year, but not the next year, due to either failing to file an audit opinion (disappeared) or filed a clean opinion (improved). 2017 represented the lowest number of disappeared companies since 2005.

Of the 627 companies that filed a going concern opinion in 2016 but not in 2017, 207 companies subsequently filed a clean audit opinion and 420 failed to file any audit opinion. Considering the number of “improved” companies increased from the previous two years and the number of “disappeared” companies is the lowest since 2005, this indicates that more companies have been able to overcome the challenges contributing to a going concern status.

A copy of the full report may be purchased here.

For more information on Going Concerns, or for subscription information, please contact us at (508) 476-7007 or info@auditanalytics.com.