A CPA Who Has Been Engaged to Audit Financial Statements

question 103

Multiple Choice

A CPA who has been engaged to audit financial statements that were prepared on a cash basis:

• A)must ascertain that there is proper disclosure of the fact that the cash basis has been used, the general nature of material items omitted, and the net effect of such omissions.
• B)may not be associated with such statements which are not in accordance with generally accepted accounting principles.
• C)must render a qualified report explaining the departure from generally accepted accounting principles in the opinion paragraph.
• D)must restate the financial statements on an accrual basis and then render the standard (short-form)report.

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Definitions:

Rational Acts

Actions or decisions that are made based on logical reasoning and coherent analysis, aiming at maximizing benefits while minimizing costs and risks.

Voice of the People

A term used to describe the opinions, wishes, or preferences of the general public or a particular segment of society.

Basis of Economy

The foundational elements or activities that support and drive the economic systems, such as production, consumption, and trade.

Self-governing

The capability of an organization or entity to regulate itself without external intervention.