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) Lease rather than purchase operating facilities.
D) Accelerate the due date of an existing mortgage.

Question

Quizplus · Accepted Answer

Leasing operating facilities instead of purchasing can reduce the entity's fixed costs and provide flexibility to adjust to changing economic conditions, which may help mitigate the adverse effects of future conditions and events. Repurchasing the entity's stock at a price below its book value, issuing stock options to key executives, and accelerating the due date of an existing mortgage would not directly address the entity's ability to continue as a going concern.

An Auditor of Financial Statements Believes That There Is Substantial