Going Concern, Going Missing: How the Auditor's Most Important Opinion Disappeared as Bankruptcies Climbed

On February 24, 2023, KPMG LLP signed an unqualified audit opinion on the financial statements of SVB Financial Group, the parent company of Silicon Valley Bank.¹ The opinion contained no reference to substantial doubt about the entity's ability to continue as a going concern. KPMG had served as the company's auditor since 1994.¹ Fourteen days later, Silicon Valley Bank collapsed after customers attempted to withdraw approximately $140 billion in deposits over the course of two days, in what became the second-largest bank failure in United States history.² A subsequent congressional review found that KPMG had considered 64 risks that could indicate SVB was in jeopardy and concluded that none applied.³ Litigation followed.⁴

Silicon Valley Bank was not an outlier. According to a Bloomberg Tax analysis published in April 2024, both management and auditors at nearly half of the twenty largest public companies that filed for bankruptcy in 2023 failed to disclose substantial doubt about the company's ability to continue as a going concern in the financial statements filed immediately prior to the bankruptcy filing.⁵ Party City Holdco, Inc., Rite Aid Corporation, Yellow Corporation, and SmileDirectClub, Inc. were among the companies whose pre-bankruptcy financial statements disclosed financial difficulties but never explicitly warned of the going-concern condition that the auditing and accounting standards in fact required them to evaluate.⁵ In the broader population of bankrupt issuers that year, approximately seventy percent received either an auditor or management going-concern warning—indicating that omission rates are materially elevated at the largest issuers.⁵

The pattern is accelerating against a backdrop of corporate bankruptcy filings at fifteen-year highs. S&P Global Market Intelligence recorded 694 large corporate bankruptcies in 2024—the most since 2010⁶—and a further 717 through the first eleven months of 2025.⁷ Cornerstone Research found that mega bankruptcies, filings by companies with more than $1 billion in reported assets, rose to 32 in the twelve months ending June 30, 2025, up from 24 in the prior twelve months.⁸

The institutional investor is entitled to ask the question that the auditing standards were designed to answer: where are the going-concern opinions?

The Standard That Reserves Its Own Loophole

PCAOB Auditing Standard 2415, Consideration of an Entity's Ability to Continue as a Going Concern, requires the auditor of an SEC registrant to evaluate "whether there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, not to exceed one year beyond the date of the financial statements being audited."⁹ If the auditor concludes that substantial doubt exists and is not alleviated by management's plans, the audit report must include an explanatory paragraph reflecting that conclusion.⁹ A parallel obligation applies to management under Accounting Standards Codification Subtopic 205-40, adopted by the Financial Accounting Standards Board in Accounting Standards Update 2014-15, which requires management to perform its own going-concern evaluation at each interim and annual reporting period and to provide specified disclosures when substantial doubt exists.¹⁰

The standard contains, within its own text, the language that has become the focal point of every retrospective inquiry into a missed going-concern opinion. AS 2415 states that "the auditor is not responsible for predicting future conditions or events" and that "the fact that the entity may cease to exist as a going concern subsequent to receiving a report from the auditor that does not refer to substantial doubt, even within one year following the date of the financial statements, does not, in itself, indicate inadequate performance by the auditor."⁹ The standard further provides that "the absence of reference to substantial doubt in an auditor's report should not be viewed as providing assurance as to an entity's ability to continue as a going concern."⁹

That language is, viewed in isolation, defensible. Auditors are not actuaries, and the going-concern evaluation is necessarily a judgment exercised under uncertainty. The difficulty is that the same language, viewed in the aggregate, has become a structural defense for the systematic underwarning of investors. The auditor's reliance on the "not responsible for predicting future conditions" provision has, in practice, almost always sufficed to deflect serious accountability when a public company collapses within months of receiving a clean opinion.

The Numbers Behind the Disappearance

The empirical record is unambiguous. Audit Analytics, the leading source of audit-opinion data, reported in its 2024 twenty-year review that going-concern opinions peaked at 2,853 in fiscal year 2008, representing 28.3 percent of all opinions issued, and that by fiscal year 2022 the figure had fallen to 1,816, or 24.3 percent of opinions.¹¹ For large accelerated filers—the population of greatest interest to institutional allocators—the going-concern rate in fiscal year 2022 was 0.7 percent.¹¹

Academic research has long documented that the predictive accuracy of going-concern opinions, while statistically meaningful, is materially incomplete. The most-cited synthesis in the field, by Carson, Fargher, Geiger, Lennox, Raghunandan, and Willekens, found that approximately 60.1 percent of corporate bankruptcy filings during the sample period from 2000 to 2010 were preceded by audit opinions modified for going-concern uncertainty.¹² The reciprocal of that figure—approximately forty percent of bankruptcies preceded by clean opinions—has not improved materially in the years since.

The Silicon Valley Bank Case Study

Silicon Valley Bank illustrates the structural defect with unusual clarity. In the period preceding KPMG's February 2023 audit opinion, SVB's deposits had fallen by approximately $25 billion over the final nine months of 2022, materially reducing the bank's liquidity.⁴ The bank's available-for-sale and held-to-maturity securities portfolios had absorbed substantial unrealized losses as a function of the Federal Reserve's interest rate increases.¹ A subsequent academic analysis published in Current Issues in Auditing concluded that "evidence suggests that SVB was already undercapitalized, and the inevitable pressures of significant interest rate increases coupled with substantial investments in AFS and HTM securities and booming deposit demand would most likely sink the firm—as argued by litigants, these conditions may have supported a going concern opinion."¹³ The audit report nonetheless concluded that there was no substantial doubt about the bank's ability to continue as a going concern.¹

Two weeks later, Silicon Valley Bank failed. Signature Bank and First Republic Bank, also audited by KPMG, failed within the following months.² A 2025 report by the Democratic minority of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations found that KPMG had dismissed a range of risks facing the three lenders before they failed.³ KPMG's public response was that its audit opinions are based on evidence available at the date of the opinion, that the firm conducts its audits in accordance with professional standards, and that audit opinions should not be interpreted as assurance against future turbulence.¹

The Silicon Valley Bank case is a near-laboratory demonstration of the framework AS 2415 establishes. The auditor identified risks, evaluated management's plans, and concluded that substantial doubt did not exist. The standard permitted that conclusion. The conclusion was wrong. And the standard, by its own terms, contemplates that such conclusions may be wrong without constituting "inadequate performance by the auditor."⁹

The pattern is not unique to the United States. KPMG also served as auditor to Carillion plc for nineteen years and issued an unqualified opinion on its 2016 financial statements approximately ten months before Carillion entered compulsory liquidation in January 2018. The Financial Reporting Council ultimately fined KPMG £30 million (reduced to £21 million for cooperation) and concluded that the firm's 2016 going-concern work was "seriously deficient."¹⁴

First Brands Group's September 2025 bankruptcy demonstrates a related failure mode in which the going-concern framework is moot regardless of the auditor's diligence. The Cleveland-based automotive parts supplier filed for Chapter 11 on September 28, 2025, after the discovery of approximately $4.6 billion in undisclosed off-balance-sheet financing—including approximately $2.3 billion in third-party factoring obligations and $800 million in supply chain finance liabilities—against approximately $6.2 billion in disclosed on-balance-sheet debt.¹⁵ On January 29, 2026, founder Patrick James and his brother Edward James were indicted in the Southern District of New York on charges including bank fraud, wire fraud, conspiracy to commit wire fraud and bank fraud, and conspiracy to commit money laundering, in connection with alleged schemes to inflate invoices, double- and triple-pledge loan collateral, falsify financial statements, and conceal liabilities from lenders; Patrick James was charged on an additional count of running a continuing financial crimes enterprise, which carries a maximum penalty of life imprisonment.¹⁶ The case demonstrates that the going-concern evaluation can be diligently performed against disclosed financial statements while remaining wholly uninformative about the entity's actual solvency.

The PCAOB Has Identified the Problem It Cannot Solve

The Public Company Accounting Oversight Board has, in successive inspection cycles, documented persistent and elevated deficiency rates in the audits of the largest registered public accounting firms. In its 2023 inspection results, the PCAOB reported that 46 percent of the engagements it reviewed contained one or more Part I.A deficiencies—instances in which the firm appeared not to have obtained sufficient appropriate audit evidence to support its opinion.¹⁷ The aggregate Part I.A deficiency rate for the six United States Global Network Firms, the affiliates of the major international audit networks, fell to 26 percent in 2024 from 35 percent in 2023, an improvement that the PCAOB nonetheless characterized as insufficient.¹⁸ At certain individual firms, the deficiency rates remained materially higher: BDO USA, P.C. reported a 60 percent rate in 2024, and Ernst & Young LLP reported 28 percent.¹⁸

The PCAOB expects to issue a proposal updating the going-concern audit standard.⁵ Institutional investors should engage in the comment process and remain attentive to the possibility that the revisions formalize the existing framework rather than constrain it.

A Forensic Framework for Institutional Investors

For the institutional allocator evaluating financial statements during a period of elevated corporate distress, the following indicators merit systematic review.

First, identify whether the issuer's most recent annual financial statements include a going-concern explanatory paragraph or, alternatively, a management disclosure under ASC 205-40 indicating that substantial doubt was raised but alleviated by management's plans. The latter disclosure is required even where the auditor has not issued a going-concern paragraph and is frequently overlooked.

Second, evaluate the substance of management's plans as disclosed in the financial statements. Plans premised on refinancing transactions that have not closed, asset sales that have not been consummated, or capital markets access that depends on conditions outside the issuer's control are weaker support than plans premised on executed agreements or committed financing. The forensic question is whether the auditor's conclusion that substantial doubt has been alleviated rests on contingencies the issuer can in fact control.

Third, examine auditor tenure and any recent change in auditor. Auditor resignations expressly attributable to a going-concern disagreement, as occurred at Party City in June 2023, are signals of unusual importance and must be disclosed promptly under Item 4.01 of Form 8-K. Unusually long auditor tenure—KPMG's twenty-nine-year relationship with SVB Financial Group is an example—merits independent scrutiny.¹

Fourth, compare the issuer's liquidity disclosures, debt-maturity schedule, and covenant-compliance representations against the auditor's clean opinion. Where significant near-term maturities, tightening covenants, deposit attrition, or unrealized portfolio losses are disclosed but the auditor has nonetheless issued an opinion that does not reference substantial doubt, the gap should itself prompt inquiry.

Fifth, monitor the issuer's interim filings. Substantial doubt frequently emerges between annual audit dates, and management is required under ASC 205-40 to perform its evaluation at each interim period. The absence of a going-concern qualification in the most recent annual report does not establish that no such qualification has been disclosed in subsequent quarterly filings.

Conclusion

The going-concern qualification is, in principle, the auditing profession's most important communication to investors—the one element of the audit report that addresses, directly and prospectively, whether the audited entity is likely to survive the period during which the financial statements will be relied upon. The structural design of the qualification—premised on management's plans, qualified by the auditor's freedom from predictive responsibility, and subject to an alleviation framework that converts substantial doubt into clean opinions—has produced a result in which the qualification is increasingly absent from the audit reports of the very companies whose collapse it was designed to anticipate.

For institutional investors, the implication is not that the auditing profession is acting in bad faith. The implication is that the framework within which auditors operate has been calibrated to produce fewer going-concern opinions, not more accurate ones, and that the rate of qualification has continued to decline even as the underlying rate of corporate failure has accelerated. The most important opinion in the audit report has, with measurable consistency, gone missing precisely when it is most needed. The forensic investor who continues to rely on its presence as evidence of distress, or its absence as evidence of solvency, is mistaking the standard for the substance.

Referenced Sources:

[1] Maura Webber Sadovi, "KPMG's 29-year SVB stint stirs independence debate," CFO Dive (March 16, 2023), reporting that SVB Financial Group filed its annual report on Form 10-K on February 24, 2023, that KPMG's audit report stated "We have served as the Company's auditor since 1994," that KPMG identified an issue related to credit losses and unfunded loan commitments as a critical audit matter, that KPMG's opinion did not reference substantial doubt about the ability of SVB Financial Group to continue as a going concern, and that the firm's public position is that audit opinions are based on evidence available at the date of the opinion and conducted in accordance with professional standards.

[2] Nicola M. White, "Review of KPMG's Bank Audits Exposes Gray Area of Responsibility," Bloomberg Tax (September 22, 2025), reporting that Silicon Valley Bank collapsed approximately two weeks after KPMG's audit opinion when customers attempted to withdraw approximately $140 billion over two days, and that Signature Bank and First Republic Bank, also audited by KPMG, failed within the following months. Silicon Valley Bank, which had approximately $209 billion in assets at the time of its closure, was the second-largest bank failure in United States history at the time of its collapse, behind only Washington Mutual's $307 billion 2008 failure; the failure of First Republic Bank in May 2023, with approximately $229 billion in assets, subsequently displaced Silicon Valley Bank to the third-largest position. See Federal Deposit Insurance Corporation data; Bankrate, "2023 Banking Crisis: Silicon Valley Bank's Collapse" (May 2023).

[3] Nicola M. White, "Review of KPMG's Bank Audits Exposes Gray Area of Responsibility," Bloomberg Tax (September 22, 2025), citing a report by the Democratic minority of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations finding that KPMG considered 64 risks that could signal Silicon Valley Bank was in jeopardy of going out of business and concluded that none applied, and that KPMG dismissed a range of risks facing all three failed regional banks in its pre-collapse audits.

[4] Maura Webber Sadovi, "SVB shareholder suit cites KPMG's 'silent' audit," CFO Dive (October 4, 2023), reporting on an SVB Financial Group shareholder action filed in October 2023 alleging, among other things, that "even though SVB's deposits began to decline in 2022, falling $25 billion during the final nine months of 2022 and reducing SVB's liquidity, KPMG did not identify risks associated with SVB's declining deposits or SVB's ability to hold debt securities to maturity in its report."

[5] Nicola M. White, "Nearly Half of 2023's Biggest Bankruptcies Lacked Key Warnings," Bloomberg Tax (April 9, 2024), reporting that both management and auditors at nearly half of the twenty largest public companies that filed for bankruptcy in 2023 failed to disclose substantial doubt about the company's ability to continue as a going concern, specifically identifying Party City Co., Rite Aid Corp., Yellow Corp., and SmileDirectClub Inc. among the companies whose pre-bankruptcy financial statements omitted such warnings; reporting that approximately seventy percent of bankrupt issuers in the broader population received either an auditor or management going-concern warning; and reporting that the PCAOB expects to issue a proposal updating its going-concern requirements.

[6] S&P Global Market Intelligence, "US corporate bankruptcies soar to 14-year high in 2024; 61 filings in December" (January 17, 2025), reporting 694 bankruptcy filings by tracked public and private companies in 2024, the highest annual total since 2010, when 828 filings were recorded.

[7] Washington Post, "Bankruptcies hit 15-year high in 2025 as tariffs roiled corporate America" (December 29, 2025), citing S&P Global Market Intelligence data showing at least 717 corporate bankruptcy filings through November 2025, approximately fourteen percent above the same eleven-month period in 2024 and the highest tally since 2010.

[8] Cornerstone Research, "Trends in Large Corporate Bankruptcy and Financial Distress—Midyear 2025 Update" (September 2025), reporting that 117 large public and private companies with assets exceeding $100 million filed for bankruptcy in the twelve months ending June 30, 2025—44 percent above the 2005–2024 annual average of 81 filings—and that 32 mega bankruptcies (companies with more than $1 billion in reported assets) occurred over the same period, up from 24 in the prior twelve months.

[9] Public Company Accounting Oversight Board, Auditing Standard 2415, Consideration of an Entity's Ability to Continue as a Going Concern (as amended, effective for audits of fiscal years ending on or after December 15, 2017), paragraphs .02, .03, .04, .10, and .12. See PCAOB Release No. 2017-001.

[10] Financial Accounting Standards Board, Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (August 2014), establishing management's responsibility to evaluate, at each interim and annual reporting period, whether conditions or events raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued, and to provide specified disclosures when such substantial doubt exists.

[11] Audit Analytics, Going Concerns: A 20-Year Review (revised June 2024), reporting that going-concern opinions peaked at 2,853 in fiscal year 2008, representing 28.3 percent of all opinions; that the figure was 1,816 (24.3 percent) in fiscal year 2022; and that the going-concern rate for large accelerated filers was 0.7 percent in fiscal year 2022, the steepest single-year decline since the immediate post-financial-crisis period.

[12] Elizabeth Carson, Neil L. Fargher, Marshall A. Geiger, Clive S. Lennox, K. Raghunandan, and Marleen Willekens, "Audit Reporting for Going-Concern Uncertainty: A Research Synthesis," Auditing: A Journal of Practice & Theory, Vol. 32, Supplement 1, pp. 353–384 (2013), Table 2, reporting that 60.10 percent of bankruptcy filings in the sample period were preceded by audit opinions modified for going-concern uncertainty.

[13] J. Stephen Grice, Paul J. Steinbart, and Anthony H. Catanach, "A Commentary on the Silicon Valley Bank Debacle," Current Issues in Auditing, Vol. 18, No. 2, pp. C11–C24 (October 2024), American Accounting Association.

[14] Financial Reporting Council, "Sanctions against KPMG LLP, KPMG Audit Plc and two former partners" (October 12, 2023), imposing fines totaling £30 million (reduced to £21 million for cooperation and admissions) on KPMG in connection with the audits of Carillion plc for the financial years 2013 through 2016 and additional audit work in 2017, and finding that "in 2016 KPMG and Mr Meehan's work in respect of going concern and Carillion's financial position generally was seriously deficient." Carillion plc entered compulsory liquidation on January 15, 2018, approximately ten months after KPMG issued an unqualified audit opinion on the company's 2016 financial statements.

[15] David Sears, "First Brands bankruptcy sheds light on broader risks in supply chain financing," Aftermarket Matters (November 7, 2025), reporting findings from an Octus credit-intelligence report identifying approximately $4.6 billion in off-balance-sheet financing alongside approximately $6.2 billion in traditional on-balance-sheet debt at First Brands Group, LLC. See also Shumaker, Loop & Kendrick, "Client Alert: First Brands Chapter 11 Filing" (December 31, 2025), reporting that First Brands' disclosed capital structure upon its September 28, 2025 Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas included approximately $5.5 billion in term loans and an asset-based lending facility with committed capacity of up to $250 million, alongside approximately $2.3 billion of third-party factoring obligations and approximately $800 million of unsecured supply-chain finance obligations.

[16] United States Attorney's Office for the Southern District of New York, "First Brands executives charged with multibillion-dollar fraud" (January 29, 2026) (announcement republished by Internal Revenue Service Criminal Investigation), announcing the unsealing of an indictment charging Patrick James, founder and former Chief Executive Officer of First Brands Group, LLC, and Edward James, former Senior Vice President of First Brands and Patrick James' brother, with "conspiracy to commit wire fraud and bank fraud, conspiracy to commit money laundering, and multiple counts of wire fraud and bank fraud, in connection with various schemes to defraud lenders regarding the liabilities and financial condition of First Brands"; the release further states that "Patrick James was charged in an additional count of managing a continuing financial crimes enterprise in connection with the charged schemes." Confirmed by subsequent arraignment proceedings on February 4, 2026, at which Patrick James pleaded not guilty to nine counts and Edward James pleaded not guilty to eight counts (Patrick James was released on a $50 million bond and Edward James on a $25 million bond). See Reuters, "First Brands founder Patrick James pleads not guilty to fraud" (February 5, 2026); CBS News, "First Brands founder Patrick James and brother Edward indicted on fraud charges" (January 29, 2026).

[17] CFO Dive, "PCAOB says deficiencies rise among reports by audit firms" (August 16, 2024), reporting that, in the PCAOB's 2023 inspection cycle, 46 percent of the engagements reviewed at audit firms in the aggregate contained one or more Part I.A deficiencies—instances in which the auditor failed to obtain sufficient appropriate audit evidence to support its opinion.

[18] AuditUpdate, "2024 PCAOB Large Firm Inspection Reports" (April 29, 2025), reporting that the aggregate Part I.A deficiency rate for the six U.S. Global Network Firms fell to 26 percent in 2024 from 35 percent in 2023, with BDO USA, P.C. at 60 percent, Grant Thornton LLP at 48 percent, Ernst & Young LLP at 28 percent, PwC at 16 percent, and Deloitte & Touche LLP at 14 percent. See also PCAOB, "Staff Update on 2024 Inspection Activities" (March 2025).

This article is published by Buxton Helmsley USA, Inc. for informational and educational purposes only. It does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. The views expressed are those of Buxton Helmsley and are based on publicly available information as of the date of publication. Investors should conduct their own due diligence and consult with qualified professionals before making investment decisions.