One of the Most Controversial Parts of the Auditor's Report

question 32

Multiple Choice

One of the most controversial parts of the auditor's report is the meaning of the term "fairly stated." What does the auditor's opinion mean when these words are used?

• A)The values in the financial statements represent the net realizable values of the assets of the entity.
• B)The financial statements are accurate and provide a true and fair representation of the entity's current financial position.
• C)The values in the financial statements represent the value of the entity now,if it were liquidated on an open market.
• D)The financial statements are fairly stated in accordance with the financial reporting framework described in the opinion paragraph.

---

Definitions:

Direct Materials

These are the raw materials that can be directly traced to the production of a product.

Direct Labor

Labor costs directly tied to the production of goods or services, including wages for workers who assemble products or operate machinery.

Direct Labor

The cost of wages for employees who are directly involved in producing a product or delivering a service.

Raw Material

The basic material from which a product is made, typically unprocessed or minimally processed substances used in manufacturing.