Dog An auditor believes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable periodof time. In evaluating the entity's plans for dealing with the adverse effects of future conditions and events, the auditor most likelywould consider, as a mitigating factor, the entity's plans to:Extend the due dates of existing loans.Operate at increased levels of production.Accelerate expenditures for research and development projects.Issue stock options to key executives.

Auditing is an independent examination of financial statements of an entity to express an opinion on…

An auditor believes that there is substantial doubt about an entity's ability to continue as a going concern for a reasona of time. In evaluating the entity's plans for dealing with the adverse effects of future conditions and events, the auditor would consider, as a mitigating factor, the entity's plans to: Extend the due dates of existing loans. Operate at increased levels of production. O Accelerate expenditures for research and development projects. O Issue stock options to key executives.

An auditor believes that there is substantial doubt about an entity's ability to continue as a going concern for a reasona of time. In evaluating the entity's plans for dealing with the adverse effects of future conditions and events, the auditor would consider, as a mitigating factor, the entity's plans to: Extend the due dates of existing loans. Operate at increased levels of production. O Accelerate expenditures for research and development projects. O Issue stock options to key executives.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter1: Auditing: Integral To The Economy

Section: Chapter Questions

Problem 27MCQ

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Similar questions

What possible actions would an auditor might take if a client’s financial statements depart from GAAP. Would the demand for assurance services increase or decrease in the future?
If events or conditions have been identified that may cast significant doubt on the entity’s ability to continue as a going concern, the auditor shall: i) Obtain sufficient appropriate audit evidence to determine whether or not a material uncertainty exists ii) Request management to make its assessment of the material uncertainty iii) Evaluate management’s plans for future actions in relation to its going concern assessment, whether management’s plans are feasible iv) Evaluate the reliability of the underlying cash flow data v) Request written representations from management regarding their plans A. i) ii) and iv) B. iii) iv) and v) C. ii) iii) and iv) D. i) ii) iii) iv) and v)
Which of the following conditions or events would most likely cause an auditor to have substantial doubt about an entity's ability to continue as a going concern? Select one: O a. Significant increase in related-party transactions. O b. Research and development projects are postponed. O c. The CEO, who is key to the company's operations, resigned. O d. All of the options are correct.
During an audit of an entity’s stockholders’ equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management’s assertion ofa. Existence or occurrence.b. Completeness.c. Valuation or allocation.d. Presentation and disclosure.
For which of the following purpose can the analytical procedure be used i) Better understanding of the client’s industry and business ii) Assess the client’s ability to continue as going concern iii) To understand the revenue growth, new investments, loans taken etc iv) To understand, if any, abnormal fluctuation in figures in Financial statements v) To reduce the need for detailed audit vi) To understand new changes in internal control environment Only i) , ii) , iii) and iv) Only i) , ii) , iv) and v) Only i) , ii) , iii) , iv) and v) All i) , ii) , iii) , iv) ,v) and vi)
During the auditor's risk assessment procedures, a meeting was held together with the company's management. During the meeting, management has discussed that the company recently acquired bond securities from various government agencies and publicly listed shares. In light of this, the audit senior asked the management about the company's investment policy, risk appetite and investment objectives. The audit senior's inquiry would most likely address which assertion? a. Rights and obligations b. Occurence c. Completeness d. Valuation
Simplified approaches for preparing pro forma statements assume that the firm’s past financial condition is an accurate indicator of the future. There are several examples from the past where organizations were not accurately reporting their financial information. Discuss the relationship between the external auditor and the organization. What steps have been taken to ensure that the relationship is truly neutral and no bias is shown by the external auditing firm?
Most auditors believe that financial statements are "presented fairly" when the statements are in accordance with GAAP, and that it is also necessary to Select one: a. assure investors that net income reported this year will be exceeded in the future b. review the statements using the accounting principles promulgated by the SEC c. examine the substance of transactions and balances for possible misinformation
Which of the following best demonstrates the concept of professional skepticism?a. Relying more extensively on external evidence rather than internal evidence.b. Focusing on items that have a more significant quantitative effect on the entity’s financialstatements.c. Critically assessing verbal evidence received from the entity’s management.d. Evaluating potential financial interests held by auditors in the client
If the auditors discover that the carrying amount of a client’s investments is overstated because of a loss in value that is other than a temporary decline in market value, they should insist thata. The approximate market value of the investments be shown in parentheses on the face of the balance sheet.b. The investments be classified as long term for balance-sheet purposes with full disclosure in the footnotes.c. The loss in value be recognized in the financial statements.d. The equity section of the balance sheet separately show a charge equal to the amount of the loss.
Which of the following control objectives for Investment under the Acquire-to-Retire process is most likely the top priority where audit procedures are most extensive for a business struggling to earn income during a pandemic? a. To ensure that investment commitments do not interfere with the required cash flow and that sufficient working funds are maintained. b. To ensure that investment documentation is adequately and securely stored. c. To ensure that invested funds and the income generated are correctly accounted for. d. To ensure that all investment decisions are adequately researched and authorized in accordance with the established objectives. e. To ensure that all relevant regulations, exchange controls and accountancy standards are complied with. To ensure that the timescale and liquidity implications of investments are adequately considered and catered for.
3. Identify the factors that may have contributed to the alleged flaws in the audit procedures that PwC applied in testing the year-end market values of the Lipper hedge funds’ investments. Discuss specific measures that audit firms can employ to reduce the likelihood that such factors will undercut the quality of their audits.