In an Examination of Prospective Financial Statements,which of the Following

question 96

Multiple Choice

In an examination of prospective financial statements,which of the following would not require a departure from the standard examination report?

• A) Scope limitation.
• B) Unreasonable assumptions.
• C) Departure from AICPA presentation guidelines.
• D) All of the above would require a departure from the standard examination report.

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Definitions:

Direct Method

A way of preparing the cash flow statement where actual cash inflows and outflows from operating activities are reported, as opposed to the indirect method.

Operating Expenses

The costs associated with the normal operations of a business, such as rent, utilities, and payroll, excluding cost of goods sold.

Dividends

Payments made by a corporation to its shareholder members, usually as a distribution of profits.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to reflect cash transactions.