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:

Prototype

A preliminary model or early sample of a product that serves as an example or basis for designing subsequent forms or versions.

Ethnically Blended

Describing a person or group that comes from or involves a mixture of different ethnic backgrounds.

Belgian

Relating to Belgium, a country in Western Europe known for its medieval towns, Renaissance architecture, and as headquarters of the European Union and NATO.

Cognition

All the mental activities associated with thinking, knowing, remembering, and communicating.