In Which of the Following Circumstances May the Auditor Issue

question 16

Multiple Choice

In which of the following circumstances may the auditor issue the standard unqualified,unmodified audit report?

• A)The client disclosed a change in accounting principles with an immaterial effect on financial position and results of operations.
• B)The financial statements do not disclose significant going concern issues.
• C)The financial statements do not disclose a justified departure from generally accepted accounting principles.
• D)The auditor has not been able to audit a substantial portion of the balance sheet because of circumstances beyond anyone's control.

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Definitions:

Accrual-Basis Operating Income

The measure of a company’s operating profit that includes all earned revenue and incurred expenses, recognized as they are earned or incurred, not when cash is exchanged.

Working Capital Accounts

Accounts representing the operating liquidity available to a business, encompassing accounts receivable, accounts payable, inventory, etc.

Operating Activities

Business activities and transactions related to the primary operations of a company, including revenue generation and expenses.

Issuing Common Stock

The process by which a corporation sells new shares of its common stock to investors to raise equity capital.