Which of the Following Is False Regarding Compliance with GAAP

question 32

Multiple Choice

Which of the following is false regarding compliance with GAAP and GAAS?

• A) Failure to comply with GAAP and GAAS will almost certainly constitute a breach of duty.
• B) Compliance with GAAP and GAAS does not automatically mean that the duty of care has been met.
• C) In some circumstances, a reasonable, competent accountant would do more than GAAP or GAAS requires.
• D) GAAP standards are established by the Financial Accounting Standards Board, and GAAS standards are established by the American Institute of Certified Public Accountants.
• E) State statutes may not impose additional legal requirements on accountants beyond GAAP and GAAS.

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Definitions:

Break-Even

The point where total costs equal total revenues, indicating no profit or loss.

Monthly Dollar Sales

The total value of all sales made within a month, expressed in dollars.

Variable Expenses

Costs that fluctuate with the level of output or sales, such as materials and labor.

Fixed Expenses

Fixed expenses are costs that do not fluctuate with changes in production level or sales volume, including lease payments and insurance.