The Following Audit Report Was Issued by the CPA Firm

question 77

Essay

The following audit report was issued by the CPA firm of Wong and Lee on a basic set of financial statements:(0) We have examined the accompanying balance sheet of X Company as of December
31, 19XX, and the related statements of (1) income and retained earnings for the year then ended. These financial statements are the responsibility of the Company's (2) board of directors. Our responsibility is to express an opinion on these financial statements based on our (3) examination.
We conducted our audit in accordance with (4) professional auditing standards. Those
standards require that we (5) plan and perform the audit to obtain reasonable assurance about whether the financial statements (6) are fairly stated. An audit includes examining, (7) on a detailed basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes (8) judging the accounting practices used and significant (9) decisions made by management, as well as evaluating the (10) completeness of the financial statement presentation. We believe that our audit provides (11) reliable evidence for our opinion.
(12) We believe the financial statements referred to above (13) present fairly, in all
respects, the financial position of X Company as of December 31, 19XX, and (14) the results of its operations and its cash flows for the year then ended (15) in conformity with promulgated accounting principles.
REQUIRED: If the wording of each numbered item is correct, enter OK. If the wording is incorrect, give the correct wording.
Answer (0) is given as an example.
(0) We have audited.

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Definitions:

Purely Competitive Firm

A business that operates in a market where there are many buyers and sellers, the products are homogenous, and there are no barriers to entering or exiting the market.

Maximize

To increase to the greatest possible amount or degree, often used in the context of optimizing outcomes such as profit, efficiency, or utility in various fields.

Total Fixed Cost

The total of all costs that do not change with the level of production or sales activities within a company.

Purely Competitive Market

A market structure characterized by many buyers and sellers, no barriers to entry, and a homogeneous product, leading to the firms being price takers.