This paper has two main objectives. The first is to analyze the explanatory paragraphs of the audit opinions and footnotes to the financial statements of 112 US bankrupt companies under SAS No. 59 for the years 2001, 2002 and 2003. The other objective is to present the Going-Concern (GC) conditions and events that were identified under the four categories suggested by SAS No. 59. The sample consists of 36 construction companies and 76 manufacturing companies. The results indicate that the companies in the Non-GC (NGC) group seem to be in a better financial position than the GC group. In terms of timeliness of the audit reports, the GC group comes out better. Also, the GC group discloses more GC conditions and events than the NGC group. Eighty-two companies (73.21%) received a GC opinion while 30 companies (26.79%) received a NGC audit opinion. Seventy-four companies (66.07%) remain active while 38 companies (33.93%) remain inactive. The results suggest that auditors follow the guidelines of SAS No. 59 more closely when issuing a GC opinion.

Normally, financial statements are prepared under the Going-Concern (GC) assumption. Under the GC assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business (Paton, 1992; and Venuti, 2004).

If the auditor has doubts as to an entity's ability to continue its operational existence for the foreseeable future, a GC qualification is appropriate. Historically, firms have received GC opinions due to uncertainties from two sources: financial distress and litigation (Nogler, 1995). The wording of the modified report is identical to a standard audit report except that an explanatory paragraph is added to inform the user of the potential violation of the GC assumption (La Salle et al., 1996). Mutchler (1984, 1985 and 1986) claims that once an auditor has determined that a GC audit report should be issued, the auditor needs to decide whether an unqualified modified report or a disclaimer is the most appropriate.

Accounting Research and Audit Practices, Statement on Auditing Standards, SAS, Decision Making, Research Methodology, Operational Environment, Public Administration, Ccash Fflow, Legal Liabilities, Working Capital Deficiency, Credit Agreement.