Question : 1.Footnotes to financial statements should not be used to a.Describe the : 1242730

 

1.Footnotes to financial statements should not be used to

a.Describe the nature and effect of a change in accounting principles

b.Identify substantial differences between book and tax income

c.Correct an improper financial statement presentation

d.Indicate bases for valuing assets

2.Assuming that none of the following have been disclosed in the financial statements, the most appropriate item for footnote disclosure is the

a.Collection of all receivables subsequent to year end

b.Revision of employees’ pension plan

c.Retirement of president of company and election of new president

d.Material decrease in the advertising budget for the coming year and  its anticipated effect upon income

3.The primary responsibility for the adequacy of disclosure in the financial statements and footnotes rests with the

a.Partner assigned to the engagement

b.Auditor in charge of fieldwork

c.Staff who draft the statements and footnotes

d.Client

4.Which of the following situations would require adjustment to or disclosure in the financial statements?

a.A merger discussion

b.The application for a patent on a new production process

c.Discussions with a customer that could lead to a 40 percent increase in the client’s sales

d.The bankruptcy of a customer who regularly purchased 30 percent of the company’s output

5.With respect to disclosure, the unqualified short-form audit report

a.States that disclosure is adequate in the financial statements including the footnotes thereto

b.States that disclosure is sufficiently adequate to make the statements not misleading

c.States that all material items are disclosed in conformity with the generally accepted accounting principles

d.Implies that disclosure is adequate in the financial statements including the footnotes thereto

6.Which of the following should be disclosed in the Summary of Significant Accounting Policies?

a.Composition of plant assets

b.Pro forma effect of retroactive application of an accounting change

c.Basis of consolidation

d.Maturity dates of long-term debt

7.An Account Principles Board Opinion was concerned with disclosure of accounting policies. A singular feature of this particular opinion is that it

a.Calls for disclosure of every accounting policy followed by a reporting entity

b.Applies to immaterial items whereas most opinions are concerned solely with material items

c.Applies also to accounting policy disclosures by not-for-profit entities, whereas most opinions are concerned solely with accounting practices of profit-oriented entities

d.Prescribes a rigid format for the disclosure of policies to be reported upon

8.Significant accounting policies may not be

a.Selected on the basis of judgment

b.Selected from existing acceptable alternatives

c.Unusual or innovative in application

d.Omitted from financial statement disclosure on the basis of judgment

9.The stock of Gates, Inc., is widely held, and the company is under the jurisdiction of the Securities and Exchange Commission. In the annual report, information about the significant accounting policies adopted by Gates should be

a.Omitted because it tends to confuse users of the report

b.Included as an integral part of the financial statements

c.Presented as supplementary information

d.Omitted because all policies must comply with the regulations of the Securities and Exchange Commission

10.The basic purpose of the securities laws of the United States is to regulate the issue of investment securities by

a.Providing a regulatory framework in those states which do not have their own securities laws

b.Requiring disclosure of all relevant facts so that investors can make informed decisions

c.Prohibiting the issuance of securities which the Securities and Exchange Commission determines are not of investment grade

d.Channeling investment funds into uses which are economically most important

 

 

 

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