Question 1

The first paragraph of the combined audit report on financial statements and internal controls:

Accepted Answer

The first paragraph of the combined audit report typically identifies the company and the financial statements that were audited.

Question 2

Segments may be created by:

Accepted Answer

All of the above choices are correct. Segments may be created by different types of business activities, geographic areas covered, or product lines offered.

Question 3

The financial statements are the responsibility of:

Accepted Answer

Management is responsible for preparing and presenting the financial statements of a company.

Question 4

Management states that it has conducted an assessment of internal controls over financial reporting based on the framework established by the Sarbanes-Oxley Act of 2002.

Accepted Answer

The answer of Management states that it has conducted an...

Question 5

Management issues a report on internal control over financial reporting along with the company's financial statements.

Accepted Answer

Management is responsible for establishing and maintaining adequate internal control over financial reporting and must issue a report on its effectiveness as part of the company's financial statements.

Question 6

Publicly-traded companies are required to file their annual financial statements with the Securities and Exchange Commission.

Accepted Answer

Publicly-traded companies in the United States must file annual financial statements with the SEC to ensure transparency and protect investors.

Question 7

The independent auditors' report is addressed to:

Accepted Answer

The independent auditors' report is typically addressed to both the board of directors and the stockholders, as they are the primary stakeholders interested in the financial statements.

Question 8

Publicly-traded companies have the option to have their financial statements audited.

Accepted Answer

Publicly-traded companies are required by law to have their financial statements audited to ensure accuracy and transparency for investors and regulators.

Question 9

Which statement about a company's internal controls over financial reporting is FALSE?

Accepted Answer

Internal controls over financial reporting are established by the company's management, not by outside auditors. Auditors evaluate and test the controls but do not establish them.

Question 10

It is NOT the independent auditor's responsibility to determine whether the audited company's financial statements comply with GAAP.

Accepted Answer

The independent auditor's responsibility is to express an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with Generally Accepted Accounting Principles (GAAP).

Question 11

An audit report is addressed to the board of directors and stockholders of the audited company.

Accepted Answer

Audit reports are typically addressed to the board of directors and stockholders as they are the primary stakeholders interested in the financial health and compliance of the company.

Question 12

The combined audit report on a company's financial statements and internal control over financial reporting typically contains five paragraphs.

Accepted Answer

The combined audit report on a company's financial statements and internal control over financial reporting typically contains five paragraphs.

Question 13

Which entity requires companies issuing publicly traded stock to have their financial statements audited by an outside auditor?

Accepted Answer

The Securities and Exchange Commission (SEC) requires companies issuing publicly traded stock to have their financial statements audited by an independent outside auditor to ensure accuracy and compliance with regulations.

Question 14

In an unqualified opinion, the auditing firm expresses that the company's:

Accepted Answer

An unqualified opinion is the most favorable type of audit opinion. It means that the auditor has found no material misstatements in the financial statements and that the financial statements are presented fairly, in all material respects, in accordance with U.S. GAAP.

Question 15

The independent auditors conduct the audit, in accordance with the standards of the Public Company Accounting Oversight Board (United States), for:

Accepted Answer

Independent auditors conduct audits in accordance with PCAOB standards to provide assurance on both the financial statements and the effectiveness of internal controls over financial reporting.

Question 16

The qualified opinion is the highest statement of assurance that an independent certified public accountant can express.

Accepted Answer

A qualified opinion indicates that there are some limitations or exceptions in the financial statements, whereas an unqualified opinion (clean opinion) is the highest level of assurance.

Question 17

The statement of management's responsibility for internal control indicates all of the following EXCEPT:

Accepted Answer

Management is responsible for designing internal controls, not the company's outside auditors.

Question 18

Footnote 1 of every public company's financial statements contains all of the following EXCEPT:

Accepted Answer

Footnote 1 typically includes the company's accounting policies, such as revenue recognition and fiscal year determination, as well as the impact of new accounting principles. However, compensation details for executives like the CEO and CFO are usually disclosed in the proxy statement or other sections of the financial report, not in Footnote 1.

Question 19

Which of the following statements regarding annual reports covering corporate social responsibility is INCORRECT?

Accepted Answer

Corporate social responsibility reports are not limited to benefiting only shareholders; they address broader stakeholder interests, including environmental and social impacts.

Quiz 11: Evaluating Performance: Earnings Quality, the Income Statement, Statement of Comprehensive Income

The first paragraph of the combined audit report on financial statements and internal controls:

Segments may be created by:

The financial statements are the responsibility of:

Management states that it has conducted an assessment of internal controls over financial reporting based on the framework established by the Sarbanes-Oxley Act of 2002.

Management issues a report on internal control over financial reporting along with the company's financial statements.

Publicly-traded companies are required to file their annual financial statements with the Securities and Exchange Commission.

The independent auditors' report is addressed to:

Publicly-traded companies have the option to have their financial statements audited.

Which statement about a company's internal controls over financial reporting is FALSE?

It is NOT the independent auditor's responsibility to determine whether the audited company's financial statements comply with GAAP.

An audit report is addressed to the board of directors and stockholders of the audited company.

The combined audit report on a company's financial statements and internal control over financial reporting typically contains five paragraphs.

Which entity requires companies issuing publicly traded stock to have their financial statements audited by an outside auditor?

In an unqualified opinion, the auditing firm expresses that the company's:

The independent auditors conduct the audit, in accordance with the standards of the Public Company Accounting Oversight Board (United States) , for:

The qualified opinion is the highest statement of assurance that an independent certified public accountant can express.

The statement of management's responsibility for internal control indicates all of the following EXCEPT:

Footnote 1 of every public company's financial statements contains all of the following EXCEPT:

Which of the following statements regarding annual reports covering corporate social responsibility is INCORRECT?