Which situation most strongly indicates a need for the auditor to consider a going concern problem?
Correct answer: A. Recurring operating losses and serious cash shortages
- A. Recurring operating losses and serious cash shortages
- B. A temporary increase in office supplies
- C. A change in the entity's logo
- D. A minor difference in stationery costs
Explanation
Recurring losses and severe cash shortages may indicate that the entity cannot meet its obligations or continue normal operations. The other situations are ordinarily too minor to provide such an indicator.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Auditing
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.
Practise Auditing
162 free Auditing MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Accounting questions like this
Accounting is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Auditing questions
What does the going concern assumption mean in financial reporting?
Which item is normally included in an audit engagement letter?
When an auditor performs a test of controls, the auditor is mainly assessing whether the controls:
Why does an auditor obtain written representations from management?
An auditor traces a sample of dispatch notes to entries in the sales journal. Which assertion is primarily tested?
What is the primary role of an internal audit function within an organisation?