An Auditor Believes That There Is Substantial Doubt About an Entity's

question 515

Multiple Choice

An auditor believes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. In evaluating the entity's plans for dealing with the adverse effects of future conditions and events, the auditor most likely would consider, as a mitigating factor, the entity's plans to:

• A) Repurchase the entity's stock at a price below its book value.
• B) Issue stock options to key executives.
• C) Lease rather than purchase operating facilities.
• D) Accelerate the due date of an existing mortgage.

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Definitions:

Positive Correlation

A relationship between two variables in which both variables move in tandem, such that as one variable increases, the other variable also increases.

Ice Cream

A sweetened frozen food typically eaten as a snack or dessert, made from dairy milk or cream, and often flavored.

Drowning

A form of asphyxia due to the aspiration of fluid into the airways, caused by submersion in liquid.

Cause-and-effect Relationships

Connections between events where one is the result of the other(s), indicating a causal relationship.