In Each of the Circumstances Listed Below, Match the Situation

question 18

Short Answer

In each of the circumstances listed below, match the situation to the type of opinion that should be given and write the identifying letter in the space provided.
A. Unqualified
B. Qualified
C. Adverse
D. Disclaimer
____ 1. Departure from GAAP of lesser materiality
____ 2. Scope limitation of significant materiality
____ 3. No GAAP departure and no scope limitation
____ 4. Scope limitation of lesser materiality
____ 5. Departure from GAAP of significant materiality

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Definitions:

Inventory Turnover Ratio

A measure of how many times a company's inventory is sold and replaced over a period. It indicates the efficiency of inventory management.

ROE

Return on Equity, a measure of a company's profitability that reveals how much profit a company generates with the money shareholders have invested.

Inventories

Assets held for sale in the ordinary course of business, or in the process of production for such sale, or in the form of materials to be consumed in the production process.

Basic Earning Power

A measure of a firm's profitability and efficiency, calculated as earnings before interest and taxes divided by total assets.