Which of the Following Circumstances Requires an Explanatory Paragraph in the Independent

question 2

Multiple Choice

Which of the following circumstances requires an explanatory paragraph in the independent auditors' report?

• A)Basing the opinion in part on the work of another auditor.
• B)Uncertainties about the outcome of a significant event that would have affected the presentation of the financial statements if the outcome could have been estimated.
• C)Substantial doubt about the entity's ability to continue as a going concern.
• D)A material change from a prior accounting period in the application of an accounting principle.
• E)An explanatory paragraph in the independent auditors' report is required in each of these circumstances.

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Definitions:

Sales Offer

A promotion or deal designed to attract customers by offering products or services at a reduced price or with added incentives.

Cash

Money in the form of coins or notes, which constitutes the company's liquid assets that are readily available for transactions.

Services

Economic activities offered by one party to another, often involving professional assessment or physical help, that do not result in the ownership of anything.

Accounting Principles

Accounting principles are the standardized guidelines and rules, such as GAAP (Generally Accepted Accounting Principles) in the U.S., that govern how financial transactions and records are reported.