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79 Cards in this Set
- Front
- Back
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What is the objective of the auditor's examination?
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to express an opinion on the financial statements (expression takes the form of an audit report)
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What are the responsibilites of company's management?
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Financial statements and internal control.
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What are the responsibilites of the auditors?
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Expression of opinion
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The auditor must be independent and an expert as to what?
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1) as to accounting (GAAP)
2) as to auditing (GAAS) 3) as to industry (particular business |
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What does professional skepticism mean?
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the auditor neither assumes management is dishonest nor assumes unquestioned honesty.
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Audits are preformed for the benefit of whom?
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primary benefit of the stockholders, but also for any other interested outside parties.
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When the auditor reports his findings based upon the evidence examined, the primary assertion is:
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whether the statements are "presented fairly" in accordance with GAAP
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The AICPA defines "fair presentation" as:
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the financial statements reflect the underlying transactions of the company in a manner that represents the financial statements within a range of acceptable limits.
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What are Statements on Auditing Standards (SASs).
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interpretations of GAAS issued by the Auditing Standards Board (ASB) of the AICPA.
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Which audits do SASs apply to?
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All audits of nonissuers and to the audits of issuers to the extent not superseded by PCAOB Auditing Standards.
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Audits of gov orgs should be conducted in accordance with _____.
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Generally Accepted Government Auditing Standards
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Who are "issuers"?
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entities subject to the rules of the SEC (primarily public companies)
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Who are the members of the PCAOB?
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5 full time members. 2 cpas, 3 non cpas. cpa can be a chair of the board only if not practiced for the past 5 years.
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What kinds of payments can members of the PCAOB receive frompublic accounting firms?
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only fixed continuing payments, such as retirement payments.
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In order to audit a public company, accounting firms must:
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register with the PCAOB
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Firms registered with the PCAOB are subject to:
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board inspection, disciplinary proceedings and sanctions.
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ASB is to AICPA as:
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IAASB isto IFAC
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Do ISAs issued by the IAASB override the local laws and regulations?
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no
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What are the two standards for engagements other than audits?
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SSAE - standards on attestation engagements
SSARS - standards for accounting and review services |
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What is the point of the ACIPA Code of Professional Conduct?
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Provide members with guidelines for behavior in the conduct of their professional affairs. provides assurance to the public that the profession intends to maintain high standards and to enforce compliance with these standards by its members.
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The ACIPA Code of Professional Conduct requires firms providing auditing, attestation, and accounting and review services to adopt a system of ____ control.
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quality
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The SEC publishes their regulations in:
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-the accounting series releases
-regulation s-k |
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Final standards adopted by the PCAOB do not become effective until they are:
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approved by the SEC
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The ______, a standard setting board of the IFAC, establishes the IFAC Code of Ethics for Accountants
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(IESBA) International Ethics Standards Board for Accountants
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What are the three levels of auditing guidance? (the GAAS hierarchy)
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1. AICPA Statements on Auditing Standards (SASs) and PCAOB Auditing Standards
2) Interpretive publications 3) Other Auditing Publications |
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How should the auditor apply interpretive publications?
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consider the guidance provided by these publications in performing an audit and be able to explain any departures, and how compliance with standards was otherwise achieved.
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what are examples of interpretive publications?
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-SAS Interpretations
-appendices to the SASs -AICPA Audit and Accounting guides -AICPA auditing Stmts of position |
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what are examples of "other auditing publications"
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auditing articles in the Journal of Accountancy
Auditing articles in the AICPA CPA Letter CPE materials textbooks etc. |
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What are the 10 GAASs?
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Training
Independence Professional Care Planning and Supervision Internal Control, Entity, and Environment Evidence Accounting = GAAP Consistency Disclosure Express Opinion |
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What are the three General Standards of GAAS?
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Training
Independence Professional Care |
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Which GAAS is considered the "cornerstone of the profession"?
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Independence
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Due professional care imposes a responsibility upon each person within an independent auditor's organization to:
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observe the standards of fieldwork and reporting.
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The exercise of due professional care implies that the auditor will obtain sufficient appropriate audit evidence to:
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limit audit risk to a low level
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the high level of assurance expected to be obtained is referred to as:
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"reasonable assurance"; absolute assurance is not possible
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the exercise of due professional care implies that the auditor will obtain _____ _____ evidence to limit audit risk to a low level
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sufficient appropriate
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______ can be defined as the maintenance of an objective attitude throughout the audit, including a questioning mind and a critical assessment of audit evidence
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professional skepticism
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what is professional skepticism?
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the auditor neither presumes management dishonesty nor presumes unquestioned management honesty
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what is often called the "Average auditor" concept?
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professional skepticism
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professional skepticism is a component of what general standard of GAAS?
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professional care
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what are the three standards of fieldwork under GAAS?
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1. Planning and supervision
2. internal control,entity, and environment 3. evidence |
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what do strong controls imply for the auditor?
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auditor will require less evidence from substantive procedures
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what do weak controls imply for the auditor?
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auditor will require more evidence from substantive procedures
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all specific audit work is performed in order to:
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gather evidence
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the auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for:
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an opinion regarding the financial statements under audit. (support auditor opinion, not f/s)
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what are the four standards of reporting under GAAS?
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1. Accounting = gaap
2. Consistency 3. Disclosure 4. Express opinion |
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which reporting standards are explicit?
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accounting is gaap
express opinion |
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which reporting standards are implicit?
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consistency and disclosure
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the objective of which standard or GAAS is to prevent misinterpretation of the degree of responsibility the auditor is assuming when his name is associated with the financial statements?
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express opinion
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Can an auditor have differing opinions for different financial statements?
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yes
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can an auditor report on one financial statement and not the others?
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yes, as long as access is not limited to info underlying the financial statement
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What must be included in the report title?
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"independent" (auditor's report)
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who is the auditor's report generally addressed to?
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the company, it's stockholders, and/or board of directors. generally not addressed to management.
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the introductory paragraph of the audit report contains the following:
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1. statement that the financial statements as identified in the report were audited
2. statement that the fin stmts are the RESPONSIBILITY of management and that the auditor's RESPONSIBILITY is to express an opinion |
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the opinion paragraph of the report contains the following:
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1. statement referring to the f/s specifically identified in the intro paragraph
2. opnion 3. stmt regarding conformity with u.s. GAAP |
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when should the report be dated by?
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on or after the date on which appropriate audit evidence, sufficient to support the opnion, has been obtained
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sufficient appropriate audit evidence includes evidence that:
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1. audit documentation has been reviewed
2. f/s have been prepared 3. mgmt has taken responsbility for the f/s |
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what does the report date signify?
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the final date of the auditor's responsbility
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where is GAAS referenced in the audit report?
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scope paragraph
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where is GAAP referenced in the audit report
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opinion paragraph
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what are the 3 major differences between the audit report under u.s. and international?
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1. ISA includes expanded descriptions of responsibilities
2. ISA is addressed as required by circumstances of the engagement, and should name location where auditor practices 3. can refer to both national audition standards and IAS only if no conflicts. |
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An adverse opinion means there is a very material ____ problem
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GAAP
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A disclaimer of opinion means that there is a significant _____ problem
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GAAS
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What does an adverse opinion state?
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the financial statements do not present fairly the financial position, results of operations, or cash flows of the entity in conformity with U.S. GAAP
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What does a Disclaimer of opinion state?
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the auditor does not express an opinion on the financial statements bc he was not able to perform an audit sufficient in scope to render an opinion
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what is management's responsibility regarding uncertainties?
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if the uncertainties are probably and reasonably estimated, then record. if they are probably and cannot estimate, disclose.
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what is the auditor's responsibility regarding uncertainties?
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assessment of whether audit evidence is sufficient to support management's assertion regarding the uncertainty
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when would you have a modified unqualified opinion with modified wording?
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in a division of responsibility, where the auditor's opinion is based in part on the report of another auditor
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in a modified unqualified opinion, when can the explanatory paragraph be placed either before or after the opinion paragraph?
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1. justified GAAP departure
2. emphasis of a matter |
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Where does the principle auditor mention a division of responsibility in the audit report?
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in all three paragraphs
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in a division of responsibility, the name of the other auditor is not mentioned unless:
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that auditor gives express permission and the report of the other auditor is presented.
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If the principal auditors decide to have an assumption of responsibility when there is another auditor involved, they must assure themselves of the ____, _____, and _____ of the other auditor.
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independence, professional competency, and reputation
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what additional steps should the auditor take when they choose an assumption of responsibility of another auditor's work in the audit?
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they should:
1) visit with the other auditor and discuss the audit procedures 2) review audit program, documentation, and evaluation of internal control performed by auditor |
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what should the explanatory paragraph of a necessary/justified departure from gaap say?
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description of the departure, its effects, and the reasons why adherence to gaap would make the f/s misleading
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what is the auditor's time period for consideration of going concern in the U.S.?
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evaluate aggregate audit evidence for substantial doubt for reasonable period of time that should not exceed one year from the date of the f/s being audited
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what is the auditor's time period for consideration of going concern for ISA?
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auditor uses same period that was used by mgmt. must be at least, but not limited to, 12 months from balance sheet date.
auditor also required to inquire mgmt regarding conditions beyond period of assessment that may cast doubt on going concern |
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what are the differences between ISA and US with how to approach the going concern assumption?
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ISA says the auditor should consider the going concern assumption throughout the engagement (when planning and performing audit procedures and in evaluating the results of audit procedures)
U.S. don't have specific procedures, but require auditor to consider whether results of the audit procedures performed identify conditions |
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what are the differences between U.S. and ISA on managements responsibility for going concern analysis?
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ISA says that mgmt has responsibility to assess it, and requires the auditor to evaluate that assessment.
U.S. don't have these reqs, and only require auditor to evaluate mgmt's plans to deal with the adverse conditions that led to the conclusion of doubt of going concern |
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what type of opinion should you use for a going concern?
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modified unqualified, although the auditor is not precluded from choosing to disclaim an opinon incases involving uncertainties.
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What specific terms should the explanatory paragraph about a going concern include in U.S. vs ISA?
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"substantial doubt" for U.S.
"signficant doubt" for ISA |
