If the Financial Statements Include an Income Statement and a Balance

question 129

Multiple Choice

If the financial statements include an income statement and a balance sheet but exclude the statement of cash flows, the auditors

• A) can issue an unqualified report.
• B) should issue a qualified opinion due to the departure from GAAP.
• C) should issue a qualified opinion because the missing statement of cash flows constitutes a scope limitation.
• D) should include the statement of cash flows, modify the report, and issue an unqualified opinion.

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Definitions:

Revenue Recognized

Income that a company has earned during a period but has not yet received payment for, adhering to the revenue recognition principle.

Money Received

The sum of cash or cash equivalents that an entity acquires from various sources, including sales or funding.

Revenue

The sum of money earned from the sale of products or services central to the business's main activities.

Prepaid Expenses

Payments made in advance for goods or services to be received in the future, recorded as assets on a balance sheet and expensed over time as the goods or services are consumed.