The auditors determined that the entity is suffering financial difficulty and the going-concern status is seriously in doubt.Assuming the entity adequately disclosed this matter in the financial statements,the auditors must choose between which of the following auditors' report alternatives?
A) Unqualified opinion with a going-concern explanatory paragraph or disclaimer of opinion.
B) Standard report or a disclaimer of opinion.
C) Qualified opinion or adverse opinion.
D) Standard report or adverse opinion.

Question

Quizplus · Accepted Answer

If the entity has adequately disclosed the financial difficulty and going-concern status, the auditors may issue an unqualified opinion but add an explanatory paragraph explaining the going-concern situation. This is allowed under the US Generally Accepted Accounting Principles (US GAAP). However, if the auditors believe that the disclosure is inadequate or if they are uncertain about the entity's ability to continue as a going concern, a disclaimer of opinion may be appropriate. Therefore, choice A is the best answer.

The Auditors Determined That the Entity Is Suffering Financial Difficulty