Leon Frank,CPA Performs an Audit of RedHen,Inc

question 103

Multiple Choice

Leon Frank,CPA performs an audit of RedHen,Inc. ,which keeps its financial statements on the tax basis of accounting.Leon is aware of this fact and audits the financial statements on the criteria of the tax basis.This type of an engagement

• A)is not accepted by the AICPA.
• B)is an audit that will cause the issuance of a special report.
• C)is actually just a compilation.
• D)is only performed by tax accountants who do not provide attest services.

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Definitions:

Drawing Account

An account that tracks the money or goods withdrawn from a business by its owners for personal use.

Capital Account

A financial statement that shows the changes in ownership interest of a company over a period.

Noncumulative

Pertains to dividends or other rights that do not accumulate if not paid or exercised in the period they are due.

Dividends in Arrears

Unpaid dividends on cumulative preferred stock which must be paid out before any dividends can be distributed to common stockholders.