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Prep This preview shows page 62 - 64 out of 82 pages. 12.Which of the following conditions or events most likely would cause an auditor to have substantialdoubt about an entity’s ability to continue as a going concern?a.Cash flows from operating activities are negative.b.Stock dividends replace annual cash dividends. We have textbook solutions for you! The document you are viewing contains questions related to this textbook. College Accounting, Chapters 1-27 Heintz/Parry Expert Verified
c.Significant related party transactions are pervasive.d.Research and development projects are postponed.13.Which of the following would not necessarily be a related party transaction?a.A purchase from another corporation that is controlled by the corporation’s chief shareholder.b.A loan from the corporation to a major shareholder.c.Sale of land to the corporation by the spouse of a director.d.A sale to another corporation with a similar name.14. A CPA engaged to audit financial statements observes that the accounting for a certain material isnot in accordance with the applicable financial reporting framework, although the departure isprominently disclosed in a note to the financial statements. The CPA shoulda.Express an unmodified opinion but insert an Emphasis of Matter paragraphs emphasizing thematter by reference to the note.b.Disclaim an opinion.c.Not allow the accounting treatment for this item to affect the type of opinion because thedeparture from the requirement of the applicable financial reporting framework was disclosed.d.Modify the opinion because of the departure from the requirement of the applicablefinancial reporting framework.15. Which of the following audit procedures would most likely assist an auditor in identifyingconditions and events that may indicate there could be substantial doubt about an entity’s ability tocontinue as a going concern?a.Confirmation of bank balances.b.Confirmation of accounts receivable from major customers.c.Reconciliation of interest expense with debt outstanding.d.Review of compliance with terms of debt agreements.16. When audited financial statements are presented in a document (e.g., annual report) containingother information, the auditora.Should read the other information to consider whether it is inconsistent with the auditedfinancial statements.b.Has no responsibility for the other information because it is not part of the basic financialstatements.c.Has an obligation to perform auditing procedures to corroborate the other information.d.Is required to express a qualified opinion if the other information has a material misstatement offact. 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 82 pages? Upload your study docs or become a Course Hero member to access this document 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. College Accounting, Chapters 1-27 Heintz/Parry Expert Verified Newly Uploaded DocumentsNewly Uploaded DocumentsWhich of the following conditions or events would cause an 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.
Which of the following conditions or events most likely would cause an auditor to have significant doubt?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? Usual trade credit from suppliers is denied.
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 ...
What are the factors affecting sufficiency of audit evidence?Sufficiency is the measure of the quantity of audit evidence. The quantity of audit evidence needed is affected by the following: Risk of material misstatement (in the audit of financial statements) or the risk associated with the control (in the audit of internal control over financial reporting).
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Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity?
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