The Auditor Is Responsible for Evaluating the Likelihood of a Client

question 34

Multiple Choice

The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time.What is considered to be a reasonable time period?

• A)One year from the audit report date.
• B)One year from the last day of field work.
• C)One year from the balance sheet date.
• D)Two years from the balance sheet date.

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Definitions:

Company's Cost

The total expenses incurred by a company in the production of goods or services, including materials, labor, and overhead.

Discounted Cash Flow

An analysis method used to estimate the value of an investment based on its expected future cash flows, adjusted for time value of money.

Initial Investment

The amount of money used to start a project, venture, or purchase an investment, before any returns or profits are considered.

Project Profitability Index

The ratio of the net present value of a project’s cash flows to the investment required.