Which of the following is a mitigating factor that might alleviate an auditor's substantial doubt about a going concern?

Answer options:

The ability to postpone expenditures for maintenance or research and development.

Pending litigation with a probable material loss.

Loss of a principal customer.

Plans to expand into new risky markets.

How to approach this question

Identify the option that generates or saves cash.

Full Answer

A.The ability to postpone expenditures for maintenance or research and development.✓ Correct

Mitigating factors are management plans that are likely to be effectively implemented and successful in addressing the problem. Delaying discretionary expenditures (R&D, maintenance) preserves liquidity.

Common mistakes

Confusing negative trends with mitigating factors.

Question 61 All questions Question 63

Practice the full CPA AUD Practice Exam

78 questions · hints · full answers · grading

More questions from this exam

Q01A CPA firm is auditing a large public company. The audit partner's spouse has just been promoted ...Hard Q02During the acceptance phase of a new audit engagement for a private company, the successor audito...Hard Q03A CPA firm is designing its system of quality control. Which of the following policies would most...Medium Q04An auditor is establishing an understanding with a client regarding the services to be performed ...Medium Q05Under the AICPA Code of Professional Conduct, which of the following fee arrangements is prohibit...Medium

View all 78 questions →