CAF-8 · Chapter 14 · Question 9 of 10
Management prepares the financial statements on a going concern basis, but the auditor definitively concludes that the entity is bankrupt and will cease trading within a month. What is the required audit opinion?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Adverse opinion
Explanation
If the financial statements are prepared on a going concern basis, but the auditor concludes that the use of the going concern basis is fundamentally inappropriate, the entire foundation of the financial statements is wrong. This is pervasive, requiring an adverse opinion.
More Audit Finalisation - Reporting MCQs
- Q1An auditor identifies that the client has failed to provide a depreciation expense for a specific building, leading to a material…
- Q2Management refuses to consolidate a major subsidiary that accounts for 80% of the group's total assets and revenues, in direct violation…
- Q3A massive fire destroys the client's accounting servers, and no backups exist. The auditor cannot verify revenue, receivables, or…
- Q4According to ISA 701, 'Key Audit Matters' (KAM) are selected from which specific pool of information?
- Q5If an auditor is forced to issue a 'Disclaimer of Opinion' on a listed entity due to a pervasive lack of evidence, how does this impact…