An auditor believes there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. In evaluating the entity's plans for dealing with the adverse effects of future conditions and events, the auditor most likely would consider, as a mitigating factor, the entity's plans to:
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1 .When single-year financial statements are presented, an auditor ordinarily would express an unmodified opinion with no emphasis of matter or other matter paragraph if the:
A Prior year's financial statements were audited by another CPA whose report, which expressed an unmodified opinion, is not presented. B Auditor wishes to emphasize an accounting matter affecting the comparability of the financial statements with those of the prior year. C Entity declines to present...
2 .Davis, CPA, believes there is substantial doubt about the ability of Hill Co. to continue as a going concern for a reasonable period of time. In evaluating Hill's plans for dealing with the adverse effects of future conditions and events, Davis most likely would consider, as a mitigating factor, Hill's plans to:
A Accumulate treasury stock at prices favorable to Hill's historic price range. B Accelerate research and development projects related to future products. C Purchase equipment and production facilities currently being leased. D Negotiate reductions in required dividends being paid on preferred stock...
3 .When an auditor has substantial doubt about an entity's ability to continue as a going concern because of the probable discontinuance of operations, the auditor most likely would express a qualified opinion if:
A Information about the entity's ability to continue as a going concern is not disclosed. B Negative trends and recurring operating losses appear to be irreversible. C The effects of the adverse financial conditions likely will cause a bankruptcy filing. D Management has no plans to reduce or delay ...
4 .A CPA firm is completing the fieldwork for an audit of Swenson Co. for the current year ended December 31. The manager in charge of the audit is performing the final steps in the evidence accumulation phase of the audit and notes that there have been several changes in Swenson during the year under audit. Which of the following items would indicate there could be substantial doubt about Swenson's ability to continue as a going concern for a reasonable period of time?
A Cash infusion by a venture capital firm. B A lack of significant contracts with new customers. C Term debt refinanced with a new bank. D Recurring working capital shortages.
5 .An auditor believes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. In evaluating the entity's plans for dealing with the adverse effects of future conditions and events, the auditor most likely would consider, as a mitigating factor, the entity's plans to:
A Accelerate expenditures for research and development projects. B Issue stock options to key executives. C Operate at increased levels of production. D Extend the due dates of existing loans.
7 .Which of the following is true?
A The auditor may issue an unmodified opinion when a material departure from GAAP exists. B When an auditor includes a paragraph after the opinion paragraph emphasizing a significant related party transaction, the opinion would be considered a qualified opinion. C When a material accounting change h...
8 .In which of the following should an auditor's report refer to the lack of consistency when there is a change in accounting principle that is significant?
A An emphasis-of-matter paragraph following the opinion paragraph. B The opinion paragraph. C The introductory paragraph. D An emphasis-of-matter paragraph before the opinion paragraph.
9 .Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?
A Stock dividends replace annual cash dividends. B Significant related party transactions are pervasive. C Research and development projects are postponed. D Cash flows from operating activities are negative.
10 .When there is a significant change in accounting principle, an auditor's report should refer to the lack of consistency in:
A The Opinion paragraph. B The Introductory paragraph. C In the Management's Responsibility paragraph. D An emphasis-of-matter paragraph following the Opinion paragraph.
