ExpertMedium1 markMultiple Choice
CPA · Question 62 · Area 4: Reporting
Which of the following is a mitigating factor that might alleviate an auditor's substantial doubt about a going concern?
Which of the following is a mitigating factor that might alleviate an auditor's substantial doubt about a going concern?
Answer options:
A.
The ability to postpone expenditures for maintenance or research and development.
B.
Pending litigation with a probable material loss.
C.
Loss of a principal customer.
D.
Plans to expand into new risky markets.
How to approach this question
Identify the option that generates or saves cash.
Full Answer
A.The ability to postpone expenditures for maintenance or research and development.✓ Correct
The ability to postpone expenditures for maintenance or research and development.
Mitigating factors are management plans that are likely to be effectively implemented and successful in addressing the problem. Delaying discretionary expenditures (R&D, maintenance) preserves liquidity.
Common mistakes
Confusing negative trends with mitigating factors.
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