Question

When a question arises about an entity's continued existence, the auditor should consider factors tending to mitigate the significance of negative information concerning the entity's means for maintaining adequate cash flow. An example of such a factor is the

a. Possibility of purchasing certain assets rather than leasing them.
b. Capability of extending the due dates of existing debt.
c. Appropriateness of changing depreciation methods from double declining balance to straight line.
d. Marketability of property and equipment that management plans to keep.

Answer 1

The marketability of property and equipment that management plans to keep is an example of a factor that mitigates the significance of negative information concerning an entity's means for maintaining adequate cash flow.

Step-by-step explanation:

When a question arises about an entity's continued existence, the auditor should consider factors tending to mitigate the significance of negative information concerning the entity's means for maintaining adequate cash flow. One example of such a factor is the marketability of property and equipment that management plans to keep. This means that if the entity has valuable assets that can be sold or used to generate cash if needed, it reduces the risk associated with maintaining adequate cash flow.