During a Review of the Financial Statements of a Nonpublic

question 2

Multiple Choice

During a review of the financial statements of a nonpublic entity,the CPA finds that the financial statements contain a material departure from generally accepted accounting principles.If management refuses to correct the financial statement presentations,the CPA should:

• A)Disclose the departure in a separate paragraph of the report.
• B)Issue an adverse opinion.
• C)Attach a note explaining the effects of the departure.
• D)Issue a compilation report.

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Definitions:

Economic Hypothesis

A proposed explanation for economic phenomena that is testable and can be confirmed or refuted by observation and experimentation.

Economic Principle

A widely accepted generalization about the economic behavior of individuals or institutions.

Cause and Effect

A relationship between events where one or more are the result of the other(s), a fundamental concept in establishing correlations in various fields.

Rational Self-interest

The principle that individuals tend to make decisions that result in the most personal benefit.