Which of the Following Conditions or Events Most Likely Would

question 3

Multiple Choice

Which of the following conditions or events most likely would 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)Stock dividends replace annual cash dividends.

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Definitions:

Hierarchy of Needs

A psychological theory proposed by Abraham Maslow that is often depicted as a pyramid with physiological needs at the base, ascending through safety, love/belonging, esteem, to self-actualization at the top.

Physiological Needs

The most basic of Maslow’s hierarchy of needs having to do with the satisfaction of physical needs, including food and shelter.

Safety and Security

Basic human needs that involve being free from harm and threat, including protection of one's health and property.

Belongingness

The human emotional need to be an accepted member of a group, feeling of connection and acceptance within a social framework.