Which of the following is true about red flags in the auditor's report? a. A change...
Which of the following is true about red flags in the auditor's report?
a. A change in auditors is a major red flag that is recorded in the auditor's report.
b. Uncertainty regarding the valuation of assets and the estimation of liabilities is a red flag because it suggests an inaccurate income statement.
c. Uncertainty due to litigation is a red flag in the auditor's report.
d. Doubt regarding the going concern assumption underlying the preparation of financial statements is a major red flag because it expresses doubt about the past performance of the company. e. None of the above.
Homework Answers
(a) is false. Change in auditors is recorded in 8-K
(b) is false. Uncertainty regarding the valuation of assets and the estimation of liabilities is a red flag because it suggests an inaccurate balance sheet.
(c) is true. Uncertainty due to litigation is a red flag in the auditor's report.
(d) is false. Doubt regarding the going concern assumption underlying the preparation of financial statements is a major red flag because it expresses doubt about the future performance of the company.
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