AICPA CPA-Auditing Exam - Topic 2 Question 5 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 5
Topic #: 2

After considering an entity's negative trends and financial difficulties, an auditor has substantial doubt about the entity's ability to continue as a going concern. The auditor's considerations relating to management's plans for dealing with the adverse effects of these conditions most likely would include management's plans to:

AIncrease current dividend distributions.

BReduce existing lines of credit.

CIncrease ownership equity.

DPurchase assets formerly leased.

Show Suggested Answer

Suggested Answer: C

Choice "c" is correct. The auditor considers any of management's plans that might serve to mitigate the adverse effects of particular conditions and events. Typically, plans to increase ownership equity, to borrow money, to restructure debt, to sell assets, and/or to reduce or delay expenditures might all be considered mitigating factors.

Choices "a", "b", and "d" are incorrect. Increasing dividend distributions, reducing lines of credit, and purchasing assets would not improve a weak cash flow situation.

by Iluminada at May 09, 2022, 07:42 PM

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Flo

4 months ago

Increasing ownership equity is a solid move for stability.

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Argelia

4 months ago

Purchasing assets formerly leased could be risky right now.

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Colby

4 months ago

Surprised that increasing dividends is even an option here!

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Jesse

4 months ago

I disagree, reducing lines of credit seems more practical.

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Lyda

5 months ago

Management should definitely look at increasing ownership equity.

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Barabara

5 months ago

Okay, I think I've got this. Massive MIMO allows for multiple data streams to be transmitted simultaneously on the same frequency, and the signals on each antenna are made orthogonal to avoid interference. I'm pretty confident those are two of the right answers.

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Vivan

5 months ago

I'm a bit confused by this question. The options all seem plausible, and I'm not sure which one is the "primary factor." I'll need to re-read the question and options carefully to try to figure out the best answer.

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Kristine

5 months ago

This looks like a straightforward question about the benefits of using Oracle Cloud Adapters. I think I can handle this one.

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Norah

5 months ago

I feel pretty confident about this topic, so I'll work through the statements methodically and select the three that are clearly incorrect.

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