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

question 40

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,due to 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 and draw attention to the issue in the audit report.

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Definitions:

Net Sales

Revenue from sales minus returns, allowances, and discounts.

Beginning Inventory

The value of goods available for sale at the start of an accounting period, before any purchases are added or sales are made.

Inventory Costing

The method of accounting that determines the value of a company's inventory, taking into account the costs of acquiring, producing, and other costs associated to bring the inventory to its current condition and location.

Cost of Goods Sold

An accounting term denoting the direct costs attributable to the production of goods sold by a company.