Read the following case and answer the questions that follow:

Broxy Corporation is independent oil and natural gas Company with headquarters in San Francisco, California. It recently received an audit opinion that expressed a going concern paragraph. The following is an excerpt from Broxy’s 2012 report:

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred recurring net losses that have resulted in an accumulated deficit of $49.7 million as of December 31, 2012. Also, the Company has limited cash and working capital to fund its future operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Required:

a. What is the general purpose of an auditors’ report?

b. What is a going concern? Define it in yourwords, don’t quote the book.

c. Are losses, restructuring, and the disposal of segments necessarily precursors (predecessor, causes) to the demise of the company?

d. What, in your words, are the auditors saying about these particular companies?

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