Question

If substantial doubt remains about going concern for a client at the end of the audit, then which of the following reports should the auditor typically issue?

a. Issue an unqualified audit report.

b. Issue an unqualified audit report with an explanatory paragraph.

c. Issue a qualified report.

d. Issue an adverse report.

Answer 1

If substantial doubt remains about going concern for a client at the end of the audit, the auditor should typically issue a qualified report with an explanatory paragraph. Option b is correct.

Step-by-step explanation:

If substantial doubt remains about going concern for a client at the end of the audit, the auditor should typically issue a qualified report. A qualified report indicates that the financial statements are fairly presented, but there is an issue or uncertainty regarding the client's ability to continue as a going concern.

In a qualified report, the auditor includes an explanatory paragraph to describe the reasons for the qualification. This paragraph provides additional information about the going concern issue and helps users of the financial statements understand the auditor's concerns.

Issuing an unqualified report or an adverse report would not be appropriate in this situation. An unqualified report indicates that the financial statements are free from material misstatement and fairly presented, while an adverse report indicates that the financial statements are not fairly presented.