If Auditors Determine There Is Substantial Doubt About the Entity

question 58

Multiple Choice

If auditors determine there is substantial doubt about the entity continuing as a going concern, _______.

• A)the next step is to obtain information about management's plans to mitigate or minimize the adverse effects of the situation
• B)the next step is to obtain information about the auditor's plans to mitigate or minimize the adverse effects of the situation
• C)they should immediately issue an adverse opinion and withdraw from the engagement
• D)the auditors should immediately invoice the client for the cost of the audit and request payment within 30 days

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Definitions:

Minimize Cost

The process of finding ways to use the smallest amount of resources or incur the lowest cost in producing goods or services.

Corporation

A legal entity that is separate from its owners, providing limited liability protection to its shareholders.

Sole Proprietorship

A company that is both owned and run by one person, where the law does not separate the owner from the entity itself.

Profits Taxed Twice

Describes circumstances where corporate profits are taxed at the business level and then taxed again when distributed as dividends to shareholders.