An auditor concludes that there is substantial doubt about a nonissuer client's ability to continue as a going concern for a reasonable period of time. Management has developed a plan to alleviate this doubt, and the auditor concludes the plan is effective and the doubt is alleviated. How should this be reported?

Answer options:

Unmodified opinion with an emphasis-of-matter paragraph describing the doubt and management's plans.

Unmodified opinion with NO emphasis-of-matter paragraph regarding going concern.

Qualified opinion due to the uncertainty.

Disclaimer of opinion.

How to approach this question

Going Concern Logic: 1. Doubt? Yes. 2. Plans alleviate? Yes -> Standard Report (with note disclosure). No -> Emphasis of Matter (Substantial Doubt).

Full Answer

B.Unmodified opinion with NO emphasis-of-matter paragraph regarding going concern.✓ Correct

Under AU-C 570, if substantial doubt is alleviated, the auditor does not include an emphasis-of-matter paragraph. (Note: Under PCAOB/Issuers, the rule is slightly different, but for nonissuers, if alleviated, no report mod).

Common mistakes

Thinking an emphasis paragraph is always required if doubt existed at any point.

Question 28 All questions Question 30

Practice the full CPA AUD Practice Exam 4

78 questions · hints · full answers · grading

More questions from this exam

Q01A CPA firm is performing an audit of a nonissuer, TechInnovate Inc. The engagement partner's spou...Hard Q02An auditor is performing an audit of an issuer, Global Corp, in accordance with PCAOB standards. ...Hard Q03A CPA is performing an audit of a county government entity that receives federal financial assist...Hard Q04During the audit of an employee benefit plan subject to ERISA, the auditor discovers that the pla...Hard Q05An auditor is evaluating the 'integrity' principle of the AICPA Code of Professional Conduct. Whi...Medium

View all 78 questions →