AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

Question

Which ONE of the following may not necessarily be a symptom of a going concern problem?

A. Redemption of debentures
B. Dividends in arrears
C. Existence of long overdue debtors
D. Heavy dependence on short-term funds for long-term needs
E. Excessive reliance on a supplier or customer

Answer

Explanation: The answer is A. Redemption of debentures. The redemption of debentures does not inherently indicate a going concern issue, as it can be part of a company’s normal debt repayment strategy. In contrast, factors such as overdue dividends, reliance on short-term financing, overdue debtors, and dependence on a single supplier or customer are more direct indicators of potential going concern issues.

Tags: Audit Assessment, Financial Indicators, Going Concern, Risk Factors
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions
Series: NOV 2011

Uploader: Dotse