When an Auditor Concludes There Is Substantial Doubt About a Continuing

question 1028

Multiple Choice

When an auditor concludes there is substantial doubt about a continuing audit client's ability to continue as a going concern for a reasonable period of time, the auditor's responsibility is to:

• A) Issue a qualified or adverse opinion, depending upon materiality, due to the possible effects on the financial statements.
• B) Consider the adequacy of disclosure about the client's possible inability to continue as a going concern.
• C) Report to the client's audit committee that management's accounting estimates may need to be adjusted.
• D) Reissue the prior year's auditor's report and add an explanatory paragraph that specifically refers to "substantial doubt" and "going concern."

Understand the application of overhead based on direct labor costs and calculate total manufacturing costs.

Recognize the recording of overhead application in accounting records.

Understand the use of predetermined overhead rates in the allocation of manufacturing overhead.

Determine total manufacturing costs including direct materials, labor, and applied overhead.

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