Notes This preview shows page 8 - 10 out of 85 pages. Which of the following conditions or events most likely would cause an auditor to have substantial doubtabout an entity's ability to continue as a going concern?a.Significant related party transactions are pervasive.b.Usual trade credit from suppliers is denied.c.Arrearages in preferred stock dividends are paid.d.Restrictions on the disposal of principal assets are present.CPA-02385ExplanationChoice "b" is correct.Indications of possible financial difficulties, such as denial of usual trade credit fromsuppliers, may cause an auditor to have substantial doubt about an entity's ability to continue as a goingconcern.Choice "a" is incorrect.The existence of related parties and the occurrence of related party transactionsdo not indicate doubt about the entity's ability to continue as a going concern.Choice "c" is incorrect.Paymentof preferred stock dividends in arrears might very well indicate animprovement in the entity's financial situation.It is the lack of payment of preferred, cumulative dividends(a possible indication of financial difficulty) that might cause an auditor to have substantial doubt about anentity's ability to continue as a going concern.Choice "d" is incorrect.Restrictions on the disposal of assets might limit the options available tomanagement as far as mitigating adverse conditions, but it would not in and of itself cause the auditor tohave substantial doubt about an entity's ability to continue as a going concern. We have textbook solutions for you! The document you are viewing contains questions related to this textbook. Business Law Today, The Essentials: Text and Summarized Cases Miller Becker CPA Review, PassMaster QuestionsLecture: Auditing 1CPA-02395Type1 M/CA-DCorr Ans: APM#9A 1-0318.CPA-02395 Au R98 #15Page 35In the first audit of a client, an auditor was not able to gather sufficient evidence about the consistentapplication of accounting principles between the current and prior year, as well as the amounts of assetsor liabilities at the beginning of the current year.This was due to the client's record retention policies.the amounts in question could materially affect current operating results, the auditor would:If Get answer to your question and much more 9© 2009 DeVry/Becker Educational Development Corp. All rights reserved. Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document End of preview. Want to read all 85 pages? Upload your study docs or become a Course Hero member to access this document Tags Auditor s report, Type1 M C, Corr Ans We have textbook solutions for you!The document you are viewing contains questions related to this textbook. The document you are viewing contains questions related to this textbook. Business Law Today, The Essentials: Text and Summarized Cases Miller Expert Verified Which of the following conditions or events most likely would cause a auditor to have substantial doubt about an entity's ability to continue as a going concern?4. events disclosed in the financial statements cause the auditor to have substantial doubt about the entity's ability to continue as a going concern.
When an auditor has substantial doubt?If the auditor concludes there is substantial doubt, he should (1) consider the adequacy of disclosure about the entity's possible inability to continue as a going concern for a reasonable period of time, and (2) include an explanatory paragraph (following the opinion paragraph) in his audit report to reflect his ...
When the auditor concludes that there is substantial doubt about the entity's ability to continue as a going concern the appropriate audit report would be?If the auditor believes there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, he should (1) obtain information about management's plans that are intended to mitigate the effect of such conditions or events, and (2) assess the likelihood that such plans can ...
What conditions will affect the auditors determination of materiality?Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.”
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Which of the following conditions or events most likely would cause an auditor to have substantial
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