Which of the Following Events Occurring After the Issuance of an Entity's

question 21

Multiple Choice

Which of the following events occurring after the issuance of an entity's financial statements and the auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements?

• A)An uninsured natural disaster occurs that may affect the entity's ability to continue as a going concern.
• B)A contingency is resolved that had been disclosed in the audited financial statements.
• C)New information is discovered concerning undisclosed lease transactions in the audited period.
• D)A subsidiary that accounts for 25 percent of the entity's consolidated net income is sold.

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Definitions:

Pretax Return

The income earned by a company before taxes are deducted.

Internal Rate Of Return

The discount rate at which the net present value of an investment project is zero; the rate of return of a project over its useful life.

Cash Inflow

The total amount of money being received by a company, often from its main activities such as sales of goods or services.

Investment Required

The amount of capital needed to undertake a project, purchase assets, or start a business to generate future returns.