The Extent of the External Auditor’s Commitment to Using the Financial Indicators Contained in ISA 570 to Judge the Appropriat-eness of Management’s Use of the Going Concern Basis when Prep-aring the Financial Statements - and its Impact on his Report (An Empirical Study on the Saudi Environment)

The main objective of the research is to know the degree of commitment of auditors in the Kingdom of Saudi Arabia to using the financial indicators contained in International Auditing Standard No. (ISA 570)with regard to judging the appropriateness of management’s use of the going concern assumption when preparing the financial statements and the ability of auditors to include the impact of that in the audit report. In order to achieve this goal, actual data was collected from three groups of companies (the first group of companies referred to by the Stock Exchange as companies that achieved cumulative losses on their capital from (20 to 50%) and their number was 10 companies).The second group of companies (companies referred to by the Stock Exchange,  They are companies that achieved cumulative losses on their capital (greater than 50%) and their number was 4 companies), and the third group of companies (companies that achieved a net loss for the year 2022 and their number was 32 companies). The researcher adopted a different approach from previous studies, which relied on a survey list to identify the most important indicators that the external auditor relied on when expressing his opinion on the appropriateness of management’s use of the going concern basis when preparing financial statements. Most previous studies have concluded that the most important indicators used by the auditor are the financial indicators contained in International Standard Auditing No. (ISA 570). However, the researcher in the current research adopted a different approach, as he relied on the actual data in the financial statements and linked them to the auditor’s report without relying on a survey list. The financial indicators contained in International Standard Auditing No. (ISA 570)that can be measured quantitatively were calculated, which included (working capital, cash flow from operating activities, debt ratio, indicators of withdrawing financial support from creditors, cash ratio, and the company’s realization of losses(. After calculating those indicators and making sure that those indicators were not good, they were  linked to the auditor’s report. The results came to confirmed that despite the poor financial indicators of the sample companies mentioned in International Standard Auditing No. (ISA 570), the auditor’s report in most cases (81.3% of the cases that require the inclusion of a paragraph on going concern in the report) did not include any reference to that There are problems with continuity in the company, which indicates that the auditor does not adhere to the financial indicators contained in the International Standard Auditing No. (ISA 570), and the researcher found only two possibilities to explain this، The first possibility, which was supported by most previous studies, is that according to the personal relationships between the auditor and the client where The auditor tries to maintain the client and avoids mentioning any continuity problems in his report to avoid losing the client. The second possibility, from the researcher’s point of view, is that there are other non-financial indicators (operational, other) obtained by the auditor that were able to remove doubt about the continuity produced by the financial indicators, and then the auditor was convinced that management’s use of the continuity basis when preparing the financial statements is appropriate despite the poor financial indicators.