40. Which of the following conditions or events most likely would cause an auditor to have substantial
Question:
40. 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?
- a. Management has postponed selected research and development projects during a general economic recession.
- b. The entity has engaged in material-related party transactions.
- c. The board of directors declares a stock dividend instead of a cash dividend.
- d. Cash flows from operating activities are negative.
41. An auditor most likely would issue a disclaimer of opinion because of
a. A scope limitation that was viewed as material and pervasive.
b. A scope limitation that was viewed as material, but not pervasive.
c. A misstatement that was viewed as material and pervasive.
d. A misstatement that was viewed as material, but not pervasive.
42. An auditor's report on financial statements prepared in conformity with the cash basis of accounting should include a separate emphasis-of-matter paragraph (labeled "Basis of Accounting") after the opinion paragraph that
a. Justifies the reasons for departing from [GAAP].
b. States whether the financial statements are fairly presented in conformity with another comprehensive basis of accounting.
c. Refers specifically to the note to the financial statements that describes the basis of accounting used.
d. Explains how the results of operations differ from financial statements prepared in conformity with [GAAP].