An Auditor Determines That There Is an Inherent Risk That

question 31

Multiple Choice

An auditor determines that there is an inherent risk that a company has not included both the basic earnings per share and diluted earnings per share amounts in financial statements even though significant dilutive securities are part of the company's complex capital structure.This determination is most likely tied to which of the following management assertions?

• A)Valuation.
• B)Presentation and disclosure.
• C)Rights and obligations.
• D)Existence.

Appreciate how the market value of stock affects corporate actions such as stock dividends and splits.

Recognize the purposes and effects of stock splits and stock dividends on par value, market value, and shareholders' equity.

Know how treasury stock transactions are recorded and their impact on financial statements.

Understand the reporting of treasury stock in financial statements and its impact on stockholders' equity.

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Definitions:

White Paper

An authoritative report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter.

First Nations

Indigenous peoples in Canada who are neither Inuit nor Métis, often used to refer to specific groups that have historic ties to territory and governmental relations within Canada.

Aboriginal Peoples

A term referring to the first inhabitants of regions such as Australia, Canada, and other parts of the world, acknowledging their unique cultures, languages, and spiritual beliefs.

Institutional Racism

A form of racism that is embedded in the laws and regulations of a society or organization, leading to discrimination against certain racial or ethnic groups.