An auditor has substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time because of negative cash flows and working capital deficiencies. Under these circumstances, the auditor would be most concerned about the:
A)control environment factors that affect the organizational structure.
B)correlation of detection risk and inherent risk.
C)effectiveness of the entity's internal control activities.
D)possible effects on the entity's financial statements.

Question

Quizplus · Accepted Answer

When an auditor has doubts about the entity's ability to continue as a going concern, the most significant concern would be the possible effects on the entity's financial statements. This is because such doubts may have a substantial impact on the presentation of the entity's financial statements and the underlying financial position, results of operations, and cash flows. Therefore, the auditor needs to assess whether the financial statements adequately reflect these potential effects and whether appropriate disclosures are made in the financial statements.

An Auditor Has Substantial Doubt About the Entity's Ability to Continue