Analytical procedures during risk assessment of a going concern _______.
A)May identify negative trends such as working capital deficiencies, adverse key financial ratios, and decreasing cash flow from operations
B)May identify positive trends such as working capital deficiencies, adverse key financial ratios, and decreasing cash flow from operations
C)May identify only external matters that have occurred such as loss of a key franchise, loss of a principal customer, or work stoppages due to natural disaster
D)May identify internal matters that have occurred such as legal proceedings

Question

Quizplus · Accepted Answer

Analytical procedures during risk assessment of a going concern may identify negative trends such as working capital deficiencies, adverse key financial ratios, and decreasing cash flow from operations. Positive trends are not relevant in this context. The analytical procedures may identify both internal and external matters that have occurred which may affect the going concern assumption. Loss of a key franchise, loss of a principal customer, or work stoppages due to natural disasters are examples of external matters that may be identified, while legal proceedings are an example of internal matters. However, the question specifically asks about risk assessment related to going concern, so options C and D can be ruled out.

Analytical Procedures During Risk Assessment of a Going Concern _______