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ACTG 343 Exam 2 With Questions And 100% ALL DETAILED CORRECT ANSWERS
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Terms in this set (136)
when either the audit process has been limited or there has been a departure from GAAP, but
Qualified Audit Opinion
neither is of sufficient seriousness to invalidate the F/S as a whole
Scope Limitation when auditors are unable to obtain sufficient appropriate evidence
when the auditor has specific knowledge that financial statements or disclosures are seriously
Adverse Opinion misstated or misleading, these opinions are rare because auditors usually are able to persuade
management to rectify problems to avoid this undesirable report
when the auditor is not able to gather sufficient information that financial statements are in
Disclaimer
conformity with GAAP
due to a change in accounting principle such that comparability is affected even though the
Lack of Consistency
auditor concurs with the desirability of the change
when the auditor determines there is significant doubt as to whether the company will be able to
pay its debts as they come due, indicators of this include significant operating losses, loss of a
Going Concern
major customer, or legal proceedings that might jeopardize the company's ability to continue
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, information in the financial statements that is sufficiently incorrect that it may impact the
Material Misstatement
economic decisions of someone relying on those statements
Explanatory Paragraph includes items such as lack of consistency, going concern, material misstatement that has now been corrected
__________
Emphasis of a Matter Paragraph would include significant transactions with related parties, important events subsequent to the balance sheet
items such as ________________________ date, or uncertainty relating to the future outcome of significant litigation or regulatory actions
each item in a financial statement is expressed as a percentage of that same item in the financial
Horizontal Analysis
statements of another year (base amount)
comparing inventory this year to inventory last year would provide the percentage change in
Example of horizontal analysis
inventory
each item in the financial statements is expressed as a percentage of an appropriate
Vertical Analysis
corresponding total, or base amount, but within the same year
cash, receivables, and inventory in the current year can be restated as a percentage of total
Example of vertical analysis
assets in the current year
financial statements that are accompanied by the corresponding financial statement of the
Comparative Financial Statement
preceding year, and often the previous two years
financial statement items are converted to ratios for evaluating the performance and risk of a
Ratio Analysis
company
Current and Quick ratios are used to measure liquidity
_ ____ of a firm
Current Ratio current assets/current liabilities
Acid Test or Quick Ratio quick assets/current liabilities
What consists of Quick Assets? cash & cash equivalents, AR, short term investments (marketable securities)
the difference between current assets and current liabilities, is a popular measure of a company's
Working Capital
ability to satisfy its short term obligations
Debt to Equity and Time Interest Earned Ratios solvency
measure ______of a firm
Debt to Equity Ratio total liabilities/stockholders equity
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