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Auditing & Assurance Services 6th Edition by Timothy Louwers
Edition 6ISBN: 978-0077862343Auditing & Assurance Services 6th Edition by Timothy Louwers
Edition 6ISBN: 978-0077862343 Exercise 2
Bankers who are processing loan applications from companies seeking large loans will probably ask for financial statements audited by an independent CPA because
A) Financial statements are too complex for the bankers to analyze themselves.
B) They are too far away from company headquarters to perform accounting and auditing themselves.
C) The consequences of making a bad loan are very undesirable.
D) They generally see a potential conflict of interest between company managers who want to get loans and the bank's needs for reliable financial statements.
A) Financial statements are too complex for the bankers to analyze themselves.
B) They are too far away from company headquarters to perform accounting and auditing themselves.
C) The consequences of making a bad loan are very undesirable.
D) They generally see a potential conflict of interest between company managers who want to get loans and the bank's needs for reliable financial statements.
Explanation
Verified
Verified
Bankers look for audited financial statement by independent CPA to process the loan application of the large loan seeking organizations.
• Financial statements are not much complex for bankers but actually it is not possible to evaluate each and every file in a short span of time to give loan that is why they look for CPA audited information as there is an conflict in the information.
• They may be far or near to the company but as the large amount of loan is involving and it is necessary to get reliable data, they move to audited financial statements.
• The consequences of a bad debt affect the operations of the bank.
• There is a potential conflict of interest between company managers and financial statement presented.Therefore, correct and most suitable option is (d)
• Financial statements are not much complex for bankers but actually it is not possible to evaluate each and every file in a short span of time to give loan that is why they look for CPA audited information as there is an conflict in the information.
• They may be far or near to the company but as the large amount of loan is involving and it is necessary to get reliable data, they move to audited financial statements.
• The consequences of a bad debt affect the operations of the bank.
• There is a potential conflict of interest between company managers and financial statement presented.Therefore, correct and most suitable option is (d)
Auditing & Assurance Services 6th Edition by Timothy Louwers
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