It Is Management's Responsibility to Select the Accounting Policies That

question 30

Multiple Choice

It is management's responsibility to select the accounting policies that are used in the preparation of the financial statements. What is the auditor's responsibility with respect to these accounting policies?

• A) approve the accounting policies that are used, so that an opinion can be stated on the fairness of the financial statements
• B) evaluate the appropriateness of the accounting policies that are used and of the associated estimates made
• C) tell management which accounting policies should be selected so that accurate estimates can be made for year-end adjustments
• D) recalculate the estimates that are used for the accounting policies (such as bad debt allowance and warranty expenses)

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Definitions:

Economic Instability

A state where an economy experiences sharp fluctuations or a lack of steady growth, leading to uncertainty and potential financial crises.

Foreign Direct Investment

An investment made by a company or individual in one country in business interests in another country, in the form of establishing business operations or acquiring business assets.

Largest Net Recipient

A term typically used in finance and trade, referring to the entity or country that receives more resources, money, or benefits than it provides or contributes.

China

China is a country in East Asia, known for being the world's most populous country and having one of the oldest civilizations. It has a mixed socialist market economy and is a major player in global affairs.