An auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. If the entity's financial statements adequately disclose its financial difficulties, the auditor's report is required to include an explanatory/emphasis-of-matter paragraph that specifically uses the phrase(s)
A) "Reasonable period of time, not to exceed one year" and "going concern."
B) "Reasonable period of time, not to exceed one year" but not "going concern."
C) "Going concern" but not "reasonable period of time, not to exceed one year."
D) Neither "going concern" nor "reasonable period of time, not to exceed one year."

Question

Quizplus · Accepted Answer

The phrase "going concern" is required when the auditor concludes that there is substantial doubt about the entity's ability to continue as a going concern. The phrase "reasonable period of time, not to exceed one year" is not required by professional auditing standards, but if it is used it can help to clarify the auditor's opinion. However, since the question states that the entity's financial statements adequately disclose its financial difficulties, it is not necessary to add the phrase "reasonable period of time, not to exceed one year" in the auditor's report. Therefore, choice C is the best option.

An Auditor Concludes That There Is Substantial Doubt About an Entity's