Which One of the Following Would the Auditor Consider to Be

question 13

Multiple Choice

Which one of the following would the auditor consider to be an indication of a potential going-concern problem?

• A)Loss of the controller to a competitor.
• B)Improper reporting of internal controls by management.
• C)Adverse key financial ratios.
• D)Large increase to sales in the month previous to year-end.

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Definitions:

Induced Consumption

The portion of consumer spending that rises when disposable income rises and falls when disposable income decreases.

Autonomous Consumption

The minimum level of spending that must occur, even if a household has no income.

Disposable Income

The sum households have for expenditures and savings after taxes on income are deducted.

Dissaving

The process where spending exceeds income, leading to a depletion of savings or accumulation of debt.