Which of the Following Requires Recognition in the Auditor's Opinion

question 89

Multiple Choice

Which of the following requires recognition in the auditor's opinion as to consistency?

• A)The correction of an error in the prior year's financial statements resulting from a mathematical mistake in capitalizing interest.
• B)A change in the estimate of provisions for warranty costs.
• C)The change from the cost method to the equity method of accounting for investments in common stock.
• D)A change in depreciation method which has no effect on current year's financial statements but is certain to affect future years.

Understand the implications of paying dividends and how it affects shareholders’ wealth.

Analyze and compute the earning per share (EPS) and price-earnings (P/E) ratios for investment appraisal.

Understand the concept of leverage and its impact on a company’s financial structure.

Evaluate a company’s ability to pay dividends and how dividend policy impacts investor perception.

---

Definitions:

General Theory

In the context of economics, it often refers to Keynes's "The General Theory of Employment, Interest, and Money," which argues that aggregate demand is the primary driving force in an economy.

Increase Spending

A policy or action that leads to a higher level of expenditure by individuals, businesses, or the government to stimulate economic activity.

Depression

A prolonged period of significant economic downturn, marked by high unemployment, low output, and declining prices.

Aggregate Demand

The cumulative demand for goods and services within an economy, reflecting the total spendable money available at various price points.