When an Accountant Compiles a Nonpublic Entity's Financial Statements That

question 84

Multiple Choice

When an accountant compiles a nonpublic entity's financial statements that omit substantially all disclosures required by generally accepted accounting principles, the accountant should indicate in the compilation report that the financial statements are

• A) Restricted for internal use only by the entity's management.
• B) Not to be given to financial institutions for the purpose of obtaining credit.
• C) Compiled in conformity with a comprehensive basis of accounting other than generally accepted accounting principles.
• D) Not designed for those who are uninformed about the omitted disclosures.

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Definitions:

Market Efficiency

A financial market theory suggesting that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Insider Trading

The illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information.

Security Prices

The market value for tradable financial instruments such as stocks, bonds, and derivatives at any given time.

Efficient-Market Hypothesis

The theory that all available information is already reflected in securities prices, therefore making it impossible to consistently achieve higher returns than the overall market.