Certain Circumstances, While Not Affecting the Auditor's Opinion on the Financial

question 37

Multiple Choice

Certain circumstances, while not affecting the auditor's opinion on the financial report, may require the auditor to add an Emphasis of Matter paragraph to the report.These circumstances include all of the following except where:

• A)there is significant uncertainty about the entity's ability to continue as a going concern.
• B)the entity is facing significant litigation.
• C)there is early application of a new accounting standard that has a pervasive effect on the financial report before its effective date.
• D)there is a matter involving a significant uncertainty that is not adequately disclosed.

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Definitions:

Average Cost

The total cost divided by the number of units produced, indicating the cost per unit of output.

Marginal Cost

The increase in total cost that arises from an extra unit of production, pivotal for decision-making in production processes.

Diminishing Returns

A principle stating that as more of a variable input is combined with a fixed input, the incremental gains in output will eventually decrease.

Increasing Returns

This refers to a scenario in economics where, as the quantity of input increases, the rate of output increases at a faster rate, leading to economies of scale.