During an Engagement to Review the Financial Statements of a Nonpublic

question 32

Multiple Choice

During an engagement to review the financial statements of a nonpublic entity, an accountant becomes aware of a material departure from GAAP. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should:

• A)express negative assurance on the accounting principles that do not conform with GAAP.
• B)disclose the departure from GAAP in a separate paragraph of the report.
• C)issue an adverse or an "except for" qualified opinion, depending on materiality.
• D)express positive assurance on the accounting principles that conform with GAAP.

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Definitions:

Conversion Price

The predetermined price at which convertible securities can be exchanged for a specified number of shares.

Convertible Bonds

Bonds that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder.

Black-Scholes Formula

A mathematical model used to determine the theoretical price of European put and call options, excluding dividends.

Continuously Compounded

A mathematical approach to compounding where the interest earned is constantly reinvested, leading to exponential growth.