An Important Part of Evaluating Whether the Financial Statements Are

question 9

Multiple Choice

An important part of evaluating whether the financial statements are fairly stated is summarising the misstatements uncovered in the audit. Whenever the auditor uncovers misstatements that are in themselves material:

• A) it is necessary to combine individually immaterial misstatements with the material misstatements and make full disclosure in the footnotes.
• B) no entries need be made, but footnote disclosure is required.
• C) it is necessary to combine individually immaterial misstatements with the material misstatements and make entries to correct the statements.
• D) the trial balance should be adjusted to correct the statements.

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Definitions:

Effective Yield

This term represents the total yield an investment returns, adjusted for compounding over a standard one-year period.

Present Value Factors

Mathematical factors used to calculate the present value of future cash flows, taking into account the time value of money and discount rates.

Maturity Value

The amount payable to the holder of a financial instrument at its maturity date, including the principal and any remaining interest.

Stated Interest Rate

The annual interest rate declared on a loan or financial instrument, not including any fees or compounding of interest.