An auditor of financial statements believes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time.In evaluating the entity's plans for dealing with the adverse effects of future conditions and events,the auditor most likely would consider,as a mitigating factor,the entity's plans to:
A)Repurchase the entity's stock at a price below its book value.
B)Issue stock options to key executives.
C)Refinance debt to lower loan payments.
D)Accelerate the due date of an existing mortgage.

Question

Quizplus · Accepted Answer

Refinancing debt to lower loan payments can reduce the financial burden on the entity and increase its ability to generate cash flows to continue operations. Repurchasing the entity's stock or issuing stock options to key executives do not address the underlying financial difficulties and may even worsen the entity's cash flow problem. Accelerating the due date of an existing mortgage would create additional financial strain on the entity and is therefore not a mitigating factor.

An Auditor of Financial Statements Believes That There Is Substantial