Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 15, Problem 32LOQ
To determine
Identify the appropriate answer related to difficulty in the auditing of the sole proprietorship.
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Why can’t investors automatically accept balance sheet entries, as written, from a GAAP balance sheet?
a. Companies may use a variety of methods to measure assets and liabilities.
b. Companies report the estimated value of the assets and liabilities.
c. Companies overstate the true value of certain tangible assets.
d. The financial statement may not have been audited.
2. If an entity's business model's objective is to hold investments
entity has a "hold to collect and sell" business model. The
1. During the period, an entity acquires an investment. The
PROBLEMS
PROBLEM 1: MULTIPLE CHOICE
1. During the period, an entity acquires an investment
investment should be classified as
a investment measured at fair value through O
comprehensive income.
b. investment measured at amortized cost.
investment measured at fair value through profit or loss
С.
d. any of these
in order to collect contractual cash flows that are solehy
payments for principal and interests, then investments should
be classified as
а.
investment measured at fair value through other
comprehensive income.
b. investment measured at amortized cost.
C.
c. investment measured at fair value through profit or loss.
d.
any
of these
3. A permanent decline in the fair value of an investment in
equity securities that the entity made an irrevocable election at
initial recognition to subsequently…
Describe pro forma income and the importance of pro forma income in the evaluation of the income statement. Choose at least two items that are excluded from pro forma income. Suggest to management why including the items would be misleading to investors and creditors.
Chapter 15 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 15 - What does the trust indenture used by a...Ch. 15 - Long-term creditors often insist upon placing...Ch. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQ
Ch. 15 - Mansfield Corporation has outstanding an issue of...Ch. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - What do you consider to be the most important...Ch. 15 - What is the primary responsibility of an...Ch. 15 - In the audit of a small corporation that issues...Ch. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Prob. 19RQCh. 15 - Corporations sometimes issue their own capital...Ch. 15 - Prob. 21RQCh. 15 - Prob. 22RQCh. 15 - Prob. 23RQCh. 15 - Prob. 24RQCh. 15 - Prob. 25RQCh. 15 - Prob. 26RQCh. 15 - Prob. 27QRACh. 15 - Prob. 28QRACh. 15 - Prob. 29QRACh. 15 - You are retained by Columbia Corporation to audit...Ch. 15 - Prob. 31QRACh. 15 - Prob. 32AOQCh. 15 - Prob. 32BOQCh. 15 - Prob. 32COQCh. 15 - Prob. 32DOQCh. 15 - Prob. 32EOQCh. 15 - When a client uses paper stock certificates, an...Ch. 15 - Prob. 32GOQCh. 15 - The auditors can best verify a clients bond...Ch. 15 - Prob. 32IOQCh. 15 - All corporate capital stock transactions should...Ch. 15 - Prob. 32KOQCh. 15 - Prob. 32LOQCh. 15 - Prob. 32MOQCh. 15 - Prob. 32NOQCh. 15 - Prob. 32OOQCh. 15 - An auditor most likely would inspect loan...Ch. 15 - Prob. 32QOQCh. 15 - Match the following definitions (or partial...Ch. 15 - Prob. 34PCh. 15 - Prob. 35PCh. 15 - Prob. 36PCh. 15 - Prob. 37P
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Similar questions
- During an audit of an entity’s stockholders’ equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management’s assertion ofa. Existence or occurrence.b. Completeness.c. Valuation or allocation.d. Presentation and disclosure.arrow_forwardThe performance of an attestation engagement on prospective financial information does not require which of the following?a. If the basis of the prospective financial information is different from the financial statements, a reconciliation of the two must be provided.b. Management must disclose all significant assumptions used in generating the prospective financial information.c. Management must disclose significant accounting policies and procedures used in generating the prospective financial information.d. Management must disclose the probability of obtaining the results included in the prospective financial information.arrow_forwardWhy is an entity permitted to change an accounting policy? A. The change would allow the entity to present a more favorable profit picture.B. The change would result in the financial statements providing more reliable and relevant information about financial position, financial performance and cash flowsC. The change is made by the internal auditorD. The change is made by the CPAarrow_forward
- Which of the following statements is a usefulness of the income statement? A. Evaluate the past performance of the enterprise. O B. Income measurement involves judgment. OC Items that cannot be measured reliably are not reported. O D. Income numbers are affected by the accounting methods employed.arrow_forwardWhich type of audit report specifies that financial statements do not present fairly the financial position, results of operations, and cash flows in conformity with accounting standards? A. Qualified report B. Adverse report C. Unqualified report D. Disclaimer of opinionarrow_forwardWith respect to the concept of materiality, which of the following statements is correct?a. Materiality depends only on the dollar amount of an item relative to other items in the financial statements.b. Materiality depends on the nature of a transaction rather than the dollar amount of the transaction.c. Materiality is determined by reference to AICPA guidelines.d. Materiality is a matter of professional judgment.arrow_forward
- Financial accounting information is characterized by all ofthe following except:a. It is historical in nature.b. It sometimes results from inexact and approximatemeasures.c. It is factual, so it does not require judgment to prepare.d. It is enhanced by management’s explanation.arrow_forwardChoose the incorrect statement:a.) The objective of the external financial statements is to communicate the economic effects of completed transactions and other events on the entity.b.) The practice of accounting requires considerable professional judgment.c.) Security analysis use information form financial statements and other sources to projects future earnings.d.) The assessment of earning quality has become an exact science.arrow_forwardThe following statement describes an accounting concept. In conditions of uncertainty more confirmatory evidence is required about the existence of an asset or a gain than about the existence of a liability or a loss.' The accounting concept which governs the above is the • A. Accruals concept • B. Dual aspect concept C. Going concern concept D. Separate entity concept. E. Materiality concept F. Prudence concept'arrow_forward
- What is false about the matching principle? a. Incurred expenses should be matched with earned revenues. b. It supports accrual accounting principles. Matches assets with liabilities d. It is in accordance with the Internatidwal Financial Reporting Standards.arrow_forwardThe objective of general-purpose financial reporting is? to provide users with financial information that implies total freedom from error to provide companies with the option to select information that favors one set of interested parties over another O to provide financial information about the reporting entity that is useful to present and potential equity investors, lender and other creditors in making decisions in their capacity as capital providers to provide a metric for financial information used to determine when the boundary between two or more entities should disregarded and the entities considered to be a licensing arrangementarrow_forwardWhat is the objective of financial reporting?a. Provide information that is useful to management in making decisions.b. Provide information that clearly portrays nonfinancial transactions.c. Provide information about the reporting entity that is useful to present andpotential equity investors, lenders, and other creditors.d. Provide information that excludes claims to the resources.arrow_forward
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