The Fourth PCAOB Standard of Reporting Requires an Auditor to Render

question 61

Multiple Choice

The fourth PCAOB standard of reporting requires an auditor to render a report whenever an auditor's name is associated with financial statements.The overall purpose of the fourth standard of reporting is to require that reports

• A) State that the examination of financial statements has been conducted in accordance with generally accepted auditing standards.
• B) Indicate the character of the auditor's examination and the degree of responsibility assumed by the auditor.
• C) Imply that the auditor is independent in fact as well as in appearance with respect to the financial statements under examination.
• D) Express whether the accounting principles used in preparing the financial statements have been applied consistently in the period under examination.

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Definitions:

CAP

An abbreviation often referring to the "Capitalization" of a company, which is the sum of a company's stock, long-term debt, and retained earnings.

FASB

The Financial Accounting Standards Board, a private, non-profit organization standard setter, which establishes the generally accepted accounting principles (GAAP) within the United States.

Agency Theory

A framework that analyzes the relationship and conflicts between principals (owners) and agents (managers) in a corporation, focusing on how to align their interests.

Managers' Behavior

The actions and decisions made by managers in the course of operating a business, which can significantly impact the company's performance and culture.