Question 1

An auditor is auditing the financial statements of a nonissuer. The auditor concludes that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. Management has developed a plan that the auditor concludes is probable of being effectively implemented and probable of mitigating the conditions. The financial statements adequately disclose the conditions and the plan. What type of report should the auditor issue?

Accepted Answer

Going Concern Logic: 1. Is there doubt? Yes. 2. Is there a plan? Yes. 3. Does the plan fix it? YES -> No Emphasis Paragraph (Standard Report). NO -> Emphasis Paragraph.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Thinking ANY going concern issue requires an emphasis paragraph. Only UNRESOLVED doubt requires the paragraph.

How to approach this question

Full Answer

Common mistakes

Practice the full CPA AUD Practice Exam 2

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