Which of the following items is a key indicator of doubt about the entity's ability to continue as a going concern?

• A. Improvement in key financial ratios
• B. Litigation in the normal course of business
• C. The company's auditors were voted out in the most recent shareholder meeting
• D. Inability to make principal and interest payments as they become due

Answer: (D)

Going concern hinges on whether the entity can continue operating in the foreseeable future. A key indicator of substantial doubt is when the entity cannot meet its obligations as they come due. Not being able to make principal and interest payments as they mature shows an immediate liquidity problem and raises serious questions about ongoing viability without external action such as restructuring or additional financing. The other items don’t directly signal ongoing viability: improvement in financial ratios suggests better liquidity, not doubt; litigation in the normal course is common and not a going-concern indicator; and changing auditors is a governance issue that doesn’t by itself establish future viability.