In Which of the Following Circumstances Would Auditors Most Likely

question 68

Multiple Choice

In which of the following circumstances would auditors most likely add an explanatory paragraph to the standard report without affecting the unqualified opinion on the entity's financial statements?

• A) The auditors are asked to report on the balance sheet but not on the other basic financial statements.
• B) There is substantial doubt about the entity's ability to continue as a going concern.
• C) Management's estimates of the effects of future events on the entity's financial condition, results of operations, and cash flows are unreasonable.
• D) Certain transactions cannot be tested because of management's records retention policy.

---

Definitions:

Accounts Receivable

Outstanding amounts due to a firm from customers for goods or services already delivered.

Cost of Goods Sold

Costs directly associated with the manufacturing of products that a business sells.

Collection Period

The standard timeframe for a corporation to collect receivables from its clientele.

Receivables Period

is the average number of days it takes for a business to collect payments from its customers after a sale has been made, indicating the efficiency of its credit and collection policies.