During an Engagement to Review the Financial Statements of a Nonpublic

question 32

Multiple Choice

During an engagement to review the financial statements of a nonpublic entity, an accountant becomes aware of a material departure from GAAP. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should:

• A)express negative assurance on the accounting principles that do not conform with GAAP.
• B)disclose the departure from GAAP in a separate paragraph of the report.
• C)issue an adverse or an "except for" qualified opinion, depending on materiality.
• D)express positive assurance on the accounting principles that conform with GAAP.

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Definitions:

Bad Debt

Money owed to a company that is unlikely to be paid by the debtor, often leading to the creditor writing it off as a loss.

Percentage of Sales

A method used to forecast financial figures, such as net income or expenses, based on a percentage of the sales volume.

Dishonored

Refers to a check or promissory note that has been refused by the bank on which it was drawn because of insufficient funds or other reasons.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.