Palpet, the client, is a small manufacturing company currently in need of cash in order to stay in business. Loan payments exceeding its cash on hand are due in 60 days and if Palpet defaults, its bank says it will foreclose on the assets used as collateral. Palpet's only recourse then would be to file bankruptcy. One solution is to seek outside financing from vendors eager to keep Palpet in business, although the availability of financing will not be known until the next fiscal year. The auditor should: Select one: O a. withhold the audit report until financing has been secured. O b. audit the financial statements and disclose the possibility that Palpet may not be able to continue as a going concern. O c. disclaim an opinion on the financial statements. O d. ignore the issue as it does not affect the current year under audit

Palpet, the client, is a small manufacturing company currently in need of cash in order to stay in business. Loan payments exceeding its cash on hand are due in 60 days and if Palpet defaults, its bank says it will foreclose on the assets used as collateral. Palpet's only recourse then would be to file bankruptcy. One solution is to seek outside financing from vendors eager to keep Palpet in business, although the availability of financing will not be known until the next fiscal year. The auditor should: Select one: O a. withhold the audit report until financing has been secured. O b. audit the financial statements and disclose the possibility that Palpet may not be able to continue as a going concern. O c. disclaim an opinion on the financial statements. O d. ignore the issue as it does not affect the current year under audit

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 16P

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