If a client expensed the acquisition cost of some assets that should have been capitalized and depreciated them over their useful lives, which of the following would be incorrect?
a. A qualified opinion would be appropriate.
b. The opinion paragraph should be modified to include language such as: "except for the effects of not capitalizing the acquisition costs of some assets...".
c. An explanatory paragraph should include the effects of the subject matter of the qualification, where practicable.
d. An explanatory paragraph should be modified to include language such as: "subject to the qualified act...".
d
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Which of the following is not a reason why an auditor obtains an understanding of internal controls?
a. Understanding the entity's internal control is a requirement of GAAS. b. The auditor must use the information to assess the risk of material misstatements arising from the lack of internal control. c. It is the primary basis for the audit report. d. It assists the auditor in designing the nature, timing and extent of further audit procedures.
Inventory turnover is a measure of liquidity that focuses on the relative size of inventory
Indicate whether the statement is true or false
Under the general rule of revenue recognition, revenue is recognized when
a. marketability and market price are assured. b. a contractual agreement exists, and cash collection is assured. c. the earnings process is complete, and a valid promise of payment has been received. d. all related expenses have been incurred.
A disadvantage of using the payback period to compare investment alternatives is that:
A. It cannot be used if a company records depreciation. B. It includes the time value of money. C. It cannot be used when cash flows are not uniform. D. It ignores cash flows beyond the payback period. E. It cannot be used to compare investments with different initial investments.