Which of the Following Conditions or Events Would Most Likely

question 6

Multiple Choice

Which of the following conditions or events would most likely cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?

• A)Cash flows from operating activities are negative.
• B)Research and development projects are postponed.
• C)Significant related-party transactions are pervasive.
• D)Share dividends have replaced annual cash dividends.

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Definitions:

Annual Payments

Regular payments made once a year, often used in the context of loans, leases, or annuities.

Certificate of Deposit

A savings certificate with a fixed maturity date and fixed interest rate, issued by banks to individuals desiring to save money for a fixed period.

Compounded Annually

The process of calculating interest and adding it to the principal sum of a deposit or loan once per year.

Interest Rate

The rate at which interest is paid by borrowers for the use of money that they borrow from lenders.