When Compiling the Financial Statements of a Private Company, an Accountant

question 15

Multiple Choice

When compiling the financial statements of a private company, an accountant should

• A)Review agreements with financial institutions for restrictions on cash balances.
• B)Study and understand the client's business.
• C)Inquire of key personnel concerning related parties and subsequent events.
• D)Perform ratio analyses of the financial data of comparable prior periods.

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Definitions:

Rate

A measure used to quantify the frequency, occurrence, or percentage of a certain event or outcome over a specified period or among a specific sample size.

Additional Money

Funds that are required or provided beyond the initially agreed amount or investment.

Simple Interest

Simple interest is a method of calculating interest where the interest charge is computed only on the original principal, and not on the interest accrued over time.

Account

A record or statement that reflects the financial transactions and their effect on an asset, liability, equity, revenue, or expense.