What Course of Action Should Auditors Take If, After Evaluating

question 43

Multiple Choice

What course of action should auditors take if, after evaluating management's plan to mitigate the effect of factors that suggest going-concern uncertainties, they believe that substantial doubt about going concern does not exist?

• A)Modify their report on the financial statements to describe management's plan to mitigate going-concern uncertainties, the procedures performed by the auditors, and indicate that substantial doubt about going concern does not exist.
• B)Prepare a separate report that describes management's plan to mitigate going-concern uncertainties, the procedures performed by the auditors, and indicate that substantial doubt about going concern does not exist.
• C)Require financial statement disclosure of management's plan to mitigate going-concern uncertainties with no modification to the auditors' report on the financial statements or no separate report on going concern.
• D)Conclude that substantial doubt about going concern does not exist and not require financial statement disclosure or modification of the auditors' report.

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Definitions:

Cash Sales

Transactions in which payment for goods or services is made at the time of sale, typically in cash form.

Manufacturing Costs

Costs associated with the production of goods, including direct materials, direct labor, and manufacturing overhead.

Insurance Expense

The cost incurred by a business for insurance policies to protect against various risks.

Property Tax

A tax assessed on real estate by the local government, based on the property's value.