Who hires the auditor?

The firm which is audited.

The auditor's accounting firm.

Students

The Financial Reporting Standards Council.

The Securities and Exchange Commission.

What is the function of the cash flow statement?

To provide information about the cash receipts and payments during an accounting period

To provide information about the operating, investing, and financing activities for an accounting period.

to reconcile the beginning and ending balance of all equity accounts.

Students

Both (a) and (b).

What are the basic financial statements provided in an annual report?

Statement of financial position and income statement

statement of financial position, income statement and cash flow statement

Statement of financial position, income statement, cash flow statement, and statement of changes in equity

Statement of financial earnings and statement of equity

What items are included in the notes to the financial statements?

Summary of accounting policies.

Changes in accounting policies, if any.

Detail about particular accounts

All of the above

Why do some firms present two figures for earnings per share-basic and diluted?

The firm has a complex capital structure with convertible securities, stock options, and warrants, which may represent but not future earnings potential or cash flow.

The auditor may Teel that as a result of poor management, future earnings potential has been diluted and therefore the firm should adjust current earning per share to reflect this

The firm has a complex capital structure with convertible securities, stock options, and warrants, which may represent potential "dilution of earnings per share

The financial statements contain many accounting changes which affect income in the current year but not future earnings potential or cash flow.