When Compiling the Financial Statements of a Nonissuer, an Accountant

question 794

Multiple Choice

When compiling the financial statements of a nonissuer, an accountant should:

• A) Review agreements with financial institutions for restrictions on cash balances.
• B) Understand the accounting principles and practices of the entity's industry.
• C) Inquire of key personnel concerning related parties and subsequent events.
• D) Perform ratio analyses of the financial data of comparable prior periods.

---

Definitions:

Accounts Receivable

Financial obligations of customers towards a firm for delivered services or goods yet to be paid for.

Promissory Note

A financial instrument containing a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Maker

In terms of financial instruments, the maker is the party that creates or issues the instrument, such as a check or promissory note.

Payee

The party in a financial transaction who receives payment.