In the Auditor's Responsibility Paragraph of the Audit Report, the Use

question 27

Multiple Choice

In the auditor's responsibility paragraph of the audit report, the use of the term 'reasonable assurance' is intended to indicate that:

• A) no misstatements exist in the financial statements.
• B) there is a possibility that material misstatements still exist in the financial statements.
• C) no material misstatements exist in the financial statements.
• D) there is a possibility that immaterial misstatements still exist in the financial statements.

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Definitions:

Equity Method

An accounting technique used by firms to assess the profits earned through their investments in other companies by reporting these profits as income.

Consolidating Entries

Journal entries made in the process of combining the financial statements of multiple subsidiaries with those of a parent company.

Original Cost

The acquisition cost of an asset before adjusting for depreciation, amortization, or impairment costs.