An Auditor May Report on Summary Financial Statements That Are

question 51

Multiple Choice

An auditor may report on summary financial statements that are derived from a complete set of audited financial statements only if the auditor

• A) expresses an unmodified opinion on the audited financial statements from which the summary financial statements are derived.
• B) indicates whether the information is fairly stated in all material respects in relation to the complete financial statements.
• C) determines that the summary financial statements include all the disclosures necessary for the complete set of financial statements.
• D) presents the summary financial statements in comparative form with the prior-year summary financial statements.

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Definitions:

Current Assets

Assets that a company expects to convert into cash, sell, or consume within one year or its normal operating cycle, whichever is longer.

Current Liabilities

Short-term financial obligations that are due within one year or within a normal operating cycle, such as accounts payable, wages payable, and short-term loans.

Company's Liquidity

The ability of a company to meet its short-term debt obligations, often assessed through liquidity ratios like the current ratio and quick ratio.

Times Interest Earned

A ratio measuring a company's ability to meet its interest obligations from its operating income.