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:

Below-Average Risk

Below-Average Risk indicates an investment or asset has a lower risk of loss compared to the average risk of the investment market or its relevant sector.

WACC

Weighted Average Cost of Capital; a measure of a firm's cost of capital in which each category of capital is proportionately weighted.

After-Tax Cost

The cost of a transaction or financial product after accounting for the effects of taxes on its overall expense.

Retained Earnings

The portion of a company's profits that is retained and reinvested in the company rather than distributed to shareholders as dividends.