Which of the following conditions or events most likely would cause an auditor to have substantial...
Which of the following conditions or events most likely would cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?
A. Management has postponed selected research and development projects during a general economic recession.
B.. The entity has engaged in material related party transactions.
C. The board of directors declares a stock dividend instead of a cash dividend.
D. Cash flows from operating activities are negative.
Homework Answers
Option D is the correct answer.
Cash flow from operating activities are negative is the condition most likely cause an auditor to have substantial doubt an entity's ability to continue as a going concern.
Cash flow from operating activity means cash outflow is more than cash inflow for operating activities. continuous negative cash flow from operating activity is not a good sign for the ability to continue the business.
Negative Cash flow from operating activity is threat for the company.
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