Audits Conducted by External Accountants Express an Opinion

question 152

Multiple Choice

Audits conducted by external accountants express an opinion:

• A)that evaluates the effectiveness of management.
• B)that taxing authorities use to ensure that the correct amount of tax owing has been calculated.
• C)that gives investors confidence their investment is not at risk.
• D)on whether or not the financial statements fairly reflect the economic events that occurred during the accounting period.

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Definitions:

Cost Method

An accounting approach used for investments, where the investment is recorded at cost and adjustments are made for dividends received or permanent declines in value.

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks, that provide the holder with claims on the firm's profits.

Fair Value

The estimated price at which an asset would exchange hands between a willing buyer and seller, neither being under any pressure to act.

Available-for-sale Securities

Financial assets that are purchased with the intention of selling them before they reach maturity, if beneficial.