MCQ for the day- The auditor has determined that there is a significant going concern uncertainty at

MCQ for the day-

The auditor has determined that there is a significant going concern uncertainty at PQR Ltd. due to
the requirement to refinance the company’s debt. Discussions with the management and the
auditor’s evaluation of management’s plans for future actions in relation to its going concern
assessment have revealed that plans to raise new equity finance are realistic and likely to deal
with the problem. Is it appropriate for PQR Ltd. to prepare its financial statements on a going
concern basis?

a) No, PQR Ltd. cannot prepare its financial statements on a going concern basis because a
significant uncertainty exists.

b) Yes, PQR Ltd. can prepare its financial statements on a going concern basis. However, the
auditor is required to express a qualified opinion.

c) Yes, PQR Ltd. can prepare its financial statements on a going concern basis. No additional
disclosure is necessary in the financial statements or the auditor’s report.

d) Yes, PQR Ltd. can prepare its financial statements on a going concern basis. However,
disclosure of both the nature of the uncertainty and management’s plan is required.