What does the going concern assumption mean in financial reporting?
Correct answer: D. The entity will remain in operation for the foreseeable future
- A. The entity's assets are all held in cash
- B. The entity must earn a profit every year
- C. The entity may never borrow funds
- D. The entity will remain in operation for the foreseeable future
Explanation
The going concern assumption means that the entity is expected to continue operating for the foreseeable future rather than being forced to liquidate. It does not require annual profits or prohibit borrowing.
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Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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