Going concern opinions decrease 31% over 20 years, report says

Going concern opinions have decreased by 31% over the past two decades, according to a new report from Ideagen Audit Analytics. The number of companies that received going concerns hit 1,515 in 2023, down from 2,202 in 2004. 

Total going concern opinions peaked in 2008 at 2,853 during the financial crisis. Going concerns and total opinions then both slowly declined until 2021 and 2022, when there was a spike due in large part to the COVID-19 pandemic and the influx of special-purpose acquisition companies. Going concerns in 2023 were down 20% from the previous year with 1,896, a return to numbers similar to those in 2017. 

But a decline in going concerns does not always indicate an improved population. In 2014, Accounting Today reported that the number of going concern opinions declined largely because many of the companies identified as being in trouble by their auditors in previous years actually went out of business.

“The initial results appear positive because they show a drop in both the number and percentage of going concerns,” Donald Whalen, former general counsel and director of research at Audit Analytics, said at the time. “Further analysis, however, reveals that most of the decrease is due to company attrition from the prior year’s going concern population (companies that disclosed a going concern for fiscal year 2013 that chose to subsequently file a termination with the SEC) rather than improvement in the population.”

It remains to be seen what the decline in recent years indicates. The Governmental Accounting Standards Board also created a task force in 2022 to address diversity in practice and clarify the circumstances under which going concern disclosures are appropriate.

The report, which analyzed financial statements in the Audit Analytics SEC Audit Opinion database, also contains findings by company size, filer type, industry, and changes or repeats in going concern opinions. 

For instance, since 2006, non-accelerated filers maintained a going concern rate nearly 10 times greater than accelerated filers and 80 times that of large accelerated filers. And since 2004, domestic filers on average have doubled the rate of foreign private issuers each year.