Compiled Financial Statements of a Nonpublic Entity Should Be Accompanied

question 20

Multiple Choice

Compiled financial statements of a nonpublic entity should be accompanied by a report stating that

• A)the scope of the accountant's procedures has not been restricted in testing the financial information that is the representation of management.
• B)the accountant assessed the accounting principles used and significant estimates made by management.
• C)the accountant does not express an opinion or any other form of assurance on the financial statements.
• D)a compilation consists primarily of inquiries of entity personnel and analytical procedures applied to financial data.

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Definitions:

CVP Analysis

Short for Cost-Volume-Profit Analysis, a tool used to determine how changes in costs and volume affect a company's operating income and net income.

Contribution Margin Ratio

The ratio of sales income that surpasses variable expenses, showing the extent to which revenue assists in covering fixed costs and generating profit.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.

Operating Leverage

The degree to which a company can increase its profits by increasing sales, reflecting how fixed costs are leveraged against sales volume.