The Auditor Has a Responsibility to Review Transactions and Activities

question 78

Multiple Choice

The auditor has a responsibility to review transactions and activities occurring after the balance sheet date to determine whether anything occurred that might affect the statements being audited. The procedures required to verify these transactions are commonly referred to as the review for

• A) contingent liabilities.
• B) subsequent year's transactions.
• C) late unusual occurrences.
• D) subsequent events.

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Definitions:

Net Cash Flow

The variation in cash earnings versus expenditures for a business during a certain period.

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated by dividing total liabilities by total assets.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets financed by its shareholders' equity.

Stockholders' Equity

Represents the residual interest in the assets of a corporation after deducting liabilities, essentially the net worth attributable to shareholders.