An Auditor Is Engaged to Report on Selected Financial Data

question 896

Multiple Choice

An auditor is engaged to report on selected financial data that are included in a client-prepared document containing audited financial statements. Under these circumstances, the report on the selected data should:

• A) Be limited to data derived from the audited financial statements.
• B) Be distributed only to senior management and the board of directors.
• C) State that the presentation is a comprehensive basis of accounting other than GAAP.
• D) Indicate that the data are not fairly stated in all material respects.

Identify and describe the components and format of the balance sheet.

Explain the inclusion and disclosure of post-reporting period events in the financial statements.

Discuss the limitations of the balance sheet in financial reporting.

Classify the balance sheet components into appropriate sections and subclassifications.

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Definitions:

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent or salaries.

Net Income

The amount of money left after subtracting all expenses, taxes, and costs from total revenue.

Variable Cost

A cost that varies depending on the level of output or activity, such as materials or labor costs in manufacturing.

Fixed Cost

A periodic cost that does not vary with production volume or sales.