An Auditor Has Substantial Doubt About the Entity's Ability to Continue

question 10

Multiple Choice

An auditor has substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time because of negative cash flows and working capital deficiencies. Under these circumstances, the auditor would be most concerned about the:

• A)control environment factors that affect the organizational structure.
• B)correlation of detection risk and inherent risk.
• C)effectiveness of the entity's internal control activities.
• D)possible effects on the entity's financial statements.

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Definitions:

Internal Validity

The extent to which a study can establish a cause-and-effect relationship free from external influences or confounding variables.

Simple Interrupted Time-Series Design

A research design analyzing data collected at regular intervals over time to determine the effect of an intervention.

Intervention of the Series

A sequence of actions or experimental manipulations designed to investigate the effects of those actions on a subsequent process or outcome.

Control Point

A specific point or condition in a process or experiment that is used as a standard for comparison or to ensure consistency.