When Expressing an Opinion on a Specified Account or Item

question 65

Multiple Choice

When expressing an opinion on a specified account or item in the financial statements, the auditor need only consider that account or item. However, the auditor must have audited the entire set of financial statements if this engagement requires a report on the entity's

• A) Net income.
• B) Retained earnings.
• C) Assets.
• D) Working capital.

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Definitions:

Retained Earnings

The portion of net earnings not distributed as dividends to shareholders but retained by the company for reinvestment.

Noncumulative Preferred Shares

Type of preferred stock where dividends not paid in a particular year do not accumulate and must be forfeited.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.

Shareholders' Equity

Shareholders' equity represents the residual interest in the assets of a corporation after deducting its liabilities, indicating the ownership interest of the shareholders.