Which of the following conditions or events would most likely cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?
A)Cash flows from operating activities are negative.
B)Research and development projects are postponed.
C)Significant related-party transactions are pervasive.
D)Share dividends have replaced annual cash dividends.

Question

Quizplus · Accepted Answer

Negative cash flows from operating activities is an indication that the entity is having difficulty generating enough cash to sustain its operations. This is considered a strong indicator that the entity may not be able to continue as a going concern in the future.

B) Postponing research and development projects may be a concern, but it is not a strong indicator that an entity may not continue as a going concern.

C) Significant related-party transactions may raise suspicions of diminished independence and potential conflict of interest, but it does not necessarily indicate that an entity may not continue as a going concern.

D) A change in dividend payout policy may have an impact on the entity's cash flows, but it is not a strong indicator that an entity may not continue as a going concern.

Which of the Following Conditions or Events Would Most Likely