When an Auditor Concludes There Is Substantial Doubt About an Entity's

question 39

Multiple Choice

When an auditor concludes there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time, the auditor's responsibility is to

• A) Prepare prospective financial information to verify whether management's plans can be effectively implemented.
• B) Project future conditions and events for a period of time not to exceed one year following the date of the financial statements.
• C) Issue a qualified or adverse opinion, depending upon materiality, because of the possible effects on the financial statements.
• D) Consider the adequacy of disclosure about the entity's possible inability to continue as a going concern.

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Definitions:

Industry Life Cycle

A sequence of stages from introduction, growth, and maturity to decline that industries typically go through, affecting companies’ strategies and performances.

Dividend Payout Rates

The proportion of a company's earnings paid out to shareholders in the form of dividends, usually expressed as a percentage.

R&D Spending

The amount of money that a company allocates towards research and development to innovate or improve its products or services.

Money Supply

The total amount of monetary assets available within an economy at a specific time.