Multiple-choice questions:
a. Which party has the primary responsibility for the financial statements?
1. Bookkeeper
2. Auditor
3. Management
4. Cost accountant
5. None of the above
b. Which of the following is a type of audit opinion that a firm would usually prefer?
1. Unqualified opinion
2. Qualified opinion
3. Adverse opinion
4. Clear opinion
5. None of the above true?
1. You are likely to regard an adverse opinion as an immaterial issue as to the reliability of the financial statements.
2. A disclaimer of opinion indicates that you should look to the auditor’s report as an indication of the reliability of the statements.
3. A review consists principally of inquiries made to company personal and analytical procedures applied to financial data.
4. When the outside accountant presents only financial information as provided by management, he or she is said to have reviewed the financial statements.
5. None of the above
d. This item need not be provided with a complete set of financial statements:
1. A 20-year summary of operations
2. Note disclosure of such items as accounting policies
3. Balance sheet
4. Income statement
5. Statement of cash flows
e. Which of the following statements is true?
1. Financial statements of legally separate entities may be issued to show financial position, income, and cash flow as they would appear if the companies were a single entity (consolidated).
2. Consolidated statements reflect a legal, rather than an economic, concept of the entity.
3. The financial statements of the parent and the subsidiary are consolidated for all majority owned subsidiaries.
4. Consolidated statements are rare in the United States.
5. The acceptance of consolidation has been decreasing.
f. Domestic accounting standards developed to meet the needs of domestic environments. Which of these factors did not influence accounting standards locally?
1. A litigious environment in the United States that led to a demand for more detailed standards in many cases
2. High rates of inflation in some countries that resulted in periodic revaluation of fixed assets and other price-level adjustments or disclosures
3. Income tax conformity in certain countries that no doubt greatly influenced domestic financial reporting
4. Reliance on open markets as the principal means of intermediating capital flows that increased the demand for information to be included in financial reports in the United States
5. The need to have standards different from the U.S. standards