Which of the following requires an explanatory paragraph in the independent auditors' report?

Select one:

a. Basing the opinion on the work of another auditor.

b. Uncertainties about the outcome of a significant event that would have affected the presentation of the financial statements.

c. Substantial doubt about the entity's viability to continue as a going concern.

d. None of these.

e. Basing the opinion on the work of another auditor, uncertainties about the outcome of a significant event that would have affected the presentation of the financial statements and substantial doubt about the entity's viability to continue as a going concern are correct.

Question 17

When a stock dividend is declared and issued:

Select one:

a. total paid-in capital does not change.

b. total stockholders' equity does not change.

c. retained earnings is normally decreased by the par value of the shares issued in the dividend.

d. total paid-in capital is decreased by the market value of the shares issued in the dividend.

Question 18

The most powerful corporate governance legislation to date has been:

Select one:

a. the Sarbanes-Oxley Act (SOX) of 2002.

b. the creation of the American Institute of Certified Public Accountants.

c. Corporate Ethics Code of 2007.

d. the regulation of inventory management practices by the SEC.

Question 19

Which of the terms is not used to identify owners' equity or stockholders' equity?

Select one:

a. Partner's capital.

b. Proprietor's capital.

c. Paid-in-capital and retained earnings.

d. Additional-paid-in-retained earnings.

Question 20

Management's statement of responsibility:

Select one:

a. usually refers to the company's system of internal controls.

b. emphasizes that the auditors are responsible for the financial statements.

c. includes a disclaimer of responsibility for the level of the P/E ratio of the company's common stock.

d. gives the president of the company an opportunity to explain why profits changed.