Which of the Following Matters Would an Auditor Most Likely

question 6

Multiple Choice

Which of the following matters would an auditor most likely consider to be a significant deficiency to be communicated to the audit committee?

• A)Management's failure to renegotiate unfavorable long-term purchase commitments.
• B)Recurring operating losses that may indicate going concern problems.
• C)Evidence of a lack of objectivity by those responsible for accounting decisions.
• D)Management's current plans to reduce its ownership equity in the entity.

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Definitions:

Contractual Obligation

A contractual obligation is a duty or responsibility that one party is legally bound to perform under a contract agreement with another party.

Cash Consideration

Payment made in cash during a transaction, as opposed to stock exchange or other non-cash assets.

Amortised Cost

A financial valuation technique that gradually writes off the initial cost of an asset over a period, or the method of allocating the cost of an intangible asset over its useful life.

Effective Interest Rate

The rate that discounts the estimated future cash payments or receipts through the expected life of the financial liability or asset or, when appropriate, a shorter period to the net carrying amount of the financial asset.