Smith, CPA, Has Been Asked to Issue a Review Report

question 920

Multiple Choice

Smith, CPA, has been asked to issue a review report on the balance sheet of Cone Company, a nonissuer, and not on the other related financial statements. Smith may do so only if:

• A) Smith compiles and reports on the related statements of income, retained earnings, and cash flows.
• B) Smith is not aware of any material modifications needed for the balance sheet to conform with GAAP.
• C) The scope of Smith's inquiry and analytical procedures is not restricted.
• D) Cone is a new client and Smith accepts the engagement after the end of Cone's fiscal year.

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Definitions:

Interest Method

A technique used in accounting and finance to calculate the interest between periods based on principal, rate, and time.

Market Rate

The prevailing interest rate available in the marketplace or the usual rate charged or paid for a particular item or service.

Discount on Bonds

The discrepancy between a bond's nominal value and its market price when the bond is issued at a price below its nominal value.

Interest Method

A technique for calculating the interest expense or income on a financial instrument over a specific period based on its carrying amount and effective interest rate.