If the Auditor Concludes That There May Be a Going-Concern

question 77

Multiple Choice

If the auditor concludes that there may be a going-concern problem,which of the following is not typically evaluated to determine the reasonableness of management's plans to overcome this problem?

• A)Management's assumption about increasing prices or market share in relationship to current industry developments.
• B)Management's assumptions about cost savings related to a reduction in the work force should be recomputed and evaluated to determine any hidden costs.
• C)Management's past track record related to delaying unnecessary expenditures.
• D)Management's assumptions about selling off assets and their relationship to current market prices.

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Definitions:

Warranty of Title

A guarantee provided by a seller to a buyer that the seller has the right to transfer ownership and no undisclosed encumbrances exist.

Particular Purpose

A specific objective or intended use for which something is designated or implemented.

Implied Warranty of Merchantability

A legal assumption that the goods sold meet certain quality standards, including that they are reasonably fit for their ordinary purpose.

Express Warranty

An explicit promise or assurance made by a seller about the condition, functionality, or quality of a product.