If Debt Covenants Are Violated, Then an Auditor Must

question 37

Multiple Choice

If debt covenants are violated, then an auditor must:

• A) issue a going concern opinion.
• B) obtain evidence that the company will continue in operations.
• C) be certain that this fact is disclosed in the financial statements.
• D) All of the above.

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Definitions:

Interest and Profits

The returns on investment from lending money and the surplus revenues from successful business operations, respectively.

Resource Suppliers

Entities or individuals that provide the essential inputs required for the production of goods and services, such as labor, raw materials, and capital.

Capitalist Income

Income generated through the ownership of capital assets like businesses, stocks, or real estate, often distinguishing the earnings of capitalists from laborers.