Which of the following is true?
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1 .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...
2 .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 ...
3 .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.
4 .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.
5 .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:
A Pay cash dividends that are in arrears to the preferred stockholders. B Purchase production facilities currently being leased from a third party. C Increase the useful lives of plant assets for depreciation purposes. D Postpone expenditures to upgrade its information technology system.
7 .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.
8 .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.
9 .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.
10 .For a particular entity's financial statements to be presented fairly in conformity with the applicable financial reporting framework, it is not required that the principles selected:
A Be appropriate in the circumstances for the particular entity. B Reflect transactions in a manner that presents the financial statements within a range of acceptable limits. C Present information in the financial statements that is classified and summarized in a reasonable manner. D Be applied on ...
