If the auditor determines that the client's current ratio is below a particular covenant level,which of the following would the auditor not do?
A)Assess the effects of the violation.
B)Assume that the debt will need to be reclassified,if the violation is not waived.
C)Consider that the debt will be due and payable,if the violation is not waived.
D)Issue an adverse audit opinion.

Question

Quizplus · Accepted Answer

The auditor would not issue an adverse audit opinion solely due to a low current ratio. An adverse opinion is only issued when there is pervasive material misstatement in the financial statements. The auditor would assess the effects of the violation, consider the possibility of debt reclassification, and potential due and payable status if the violation is not waived.

If the Auditor Determines That the Client's Current Ratio Is