ExpertHard1 markMultiple Choice
CPA · Question 47 · Area III: Procedures
In the audit 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's plans do not alleviate this doubt. The financial statements adequately disclose the uncertainty. The auditor should issue:
In the audit 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's plans do not alleviate this doubt. The financial statements adequately disclose the uncertainty. The auditor should issue:
Answer options:
A.
A qualified opinion.
B.
An adverse opinion.
C.
An unmodified opinion with an emphasis-of-matter paragraph.
D.
A disclaimer of opinion.
How to approach this question
Going Concern Logic: 1. Is it disclosed? Yes -> Unmodified + EOM. No -> Qualified/Adverse.
Full Answer
C.An unmodified opinion with an emphasis-of-matter paragraph.✓ Correct
An unmodified opinion with an emphasis-of-matter paragraph.
If substantial doubt exists and is adequately disclosed, the financial statements are fairly presented in accordance with GAAP. Therefore, the opinion is Unmodified. However, the auditor must add a separate section (Emphasis-of-Matter) titled 'Substantial Doubt About the Entity's Ability to Continue as a Going Concern'.
Common mistakes
Thinking Going Concern issues automatically mean the numbers are wrong (Qualified/Adverse).
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