1.\tAn unmodified audit opinion rendered on a governmental unit’s basic financial statements means those statements:\t\u00a0\tHave been certified as free from error.\tPresent the entity’s financial position fairly in conformity with GAAP.\tDid not require modifications by the auditor.\tAll of the above.\t\u00a0\t2\tMelinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Inc., that pays 8 percent interest with similar risk and other nontax characteristics to the City of Heflin bond. Assume Melinda’s marginal tax rate is 25 percent. (Leave no cells blank – be sure to enter “0” wherever required.)\t\u00a0\t\u00a0\t\u00a0\ta. What is her after-tax rate of return for the City of Heflin bond?\t\u00a0\t\u00a0\t\u00a0\t3.\t\u00a0\tOne of the primary purposes of the Single Audit Act of 1984 (amended in 1996) is to:\t\u00a0\tPromote the efficient and effective use of audit resources.\tMake audit activity legal at the federal level.\tAllow federal auditors greater access to government entities receiving federal funds.\tDetect fraud, waste and abuse in government entities.\t\u00a0\t\u00a0\t4.\tTech Company has disclosed an uncertainty due to pending litigation. The auditor’s decision to issue a qualified opinion on Tech’s financial statements would most likely result from:\t\u00a0\tthe entity’s lack of experience with such litigation.\t\u00a0\tan inability to estimate the amount of loss.\t\u00a0\ta lack of sufficient evidence.\t\u00a0\ta lack of insurance coverage for possible losses from such litigation.\t\u00a0\t\u00a0\t5.\tThe goal(s) of a performance audit include(s) assessment of:\tEconomy.\tInternal control compliance.\tProgram effectiveness.\tAll of the above.\t\u00a0\t\u00a0\t6.\tEagle Company, a public company, had a computer failure and lost part of its financial data. As a result, the auditor was unable to obtain sufficient audit evidence relating to Eagle’s inventory account. Assuming the inventory account is at least material, the auditor would most likely choose either:\t\u00a0\ta qualified opinion with no explanatory paragraph or a qualified opinion with an explanatory paragraph.\t\u00a0\tan unqualified opinion with no explanatory paragraph or an unqualified opinion with an explanatory paragraph.\t\u00a0\ta qualified opinion or an adverse opinion.\t\u00a0\ta qualified opinion or a disclaimer of opinion.\t\u00a0\t\u00a0\t\u00a0\t7.\tWhich of the following funds is a governmental fund-type?\t\u00a0\tEnterprise fund.\tInternal service fund.\tPermanent fund.\tPrivate-purpose trust fund.\t\u00a0\t\u00a0\t8.\tWhich of the following is true regarding financial reporting for internal service funds?\t\u00a0\t\u00a0\tInternal service funds are generally reported in the Governmental Activities column of the government-wide financial statements.\tInternal service funds are generally reported in the Business-type Activities column of the government-wide financial statements.\tInternal service funds are aggregated and reported as a major fund in the proprietary fund financial statements.\tInternal service funds are reported in the governmental fund financial statements.\t\u00a0\t\u00a0\t\u00a0\t9.\tThe body that has the responsibility to set generally accepted accounting principles in Canada is the:\t\u00a0\tAcSB.\tOSC.\tFASB.\tIASC.\t\u00a0\t\u00a0\t10.\tUnder GASB standards, where are nonmajor funds reported?\t\u00a0\t\u00a0\tIn aggregate amounts in a single column in the fund financial statements.\tIn a note disclosure following the financial statements.\tIn the government-wide financial statements.\tIn the management’s discussion and analysis preceding the financial statements.\t\u00a0\t\u00a0\t11.\tFor each of the following scenarios, indicate how they would be classified for fund balance reporting purposes by selecting from the list of classification. \t\u00a0\t\u00a0\t\u00a0\t\u00a0\t12.\tWhich of the following would be considered Category (b) GAAP for state and local government auditees?\t\u00a0\tGASB Statements and Interpretations.\tAICPA Practice Bulletins if specifically made applicable to state and local governments by the AICPA and cleared by the GASB.\tGASB Technical Bulletins.\tGASB Implementation Guides.\t\u00a0\t13.\t\u00a0\t\u00a0The estate of Monique Chablis earned $450 of income this year. Is the estate required to file an income tax return?\t\u00a0\t\u00a0\t\u00a0\tNo, because the estate’s gross income is less than $600, the estate is not required to file an income tax return.\t\u00a0\t\u00a0\t14.\tThe essential characteristic(s) of accounting is (are):\t\u00a0\t\u00a0\tcommunication of financial information to interested persons, communication of financial information about economic entities, and identification, measurement, and communication of financial information.\tcommunication of financial information about economic entities.\tcommunication of financial information to interested persons.\tidentification, measurement, and communication of financial information.\t\u00a0\t\u00a0\t\u00a0\t15.\tFor each of the following independent situations, indicate the type of financial statement audit report that you would issue and briefly explain your reasoning. Assume that all companies mentioned are private companies and that each item is at least material.\t\u00a0\t\u00a0\ta.\u00a0 Barefield Corporation, a wholly owned subsidiary of Sandy, Inc., is audited by another CPA firm. As the auditor of Sandy, Inc., you have assured yourself of the other CPA firm’s independence and professional reputation. However, you are unwilling to take complete responsibility for its audit work.\t\u00a0\t\u00a0\tb. The management of Bonner Corporation has decided to exclude the statement of cash flows from its financial statements because it believes that its bankers do not find the statement to be very useful.\t\u00a0\tc. You are auditing Diverse Carbon, a manufacturer of nerve gas for the military, for the year ended September 30. On September 1, one of its manufacturing plants caught fire, releasing nerve gas into the surrounding area. Two thousand people were killed and numerous others paralyzed. The company’s legal counsel indicates that the company is liable and that the amount of the liability can be reasonably estimated, but the company refuses to disclose this information in the financial statements.\t\u00a0\td. During your audit of Cuccia Coal Company, the controller, Tracy Tricks, refuses to allow you to confirm accounts receivable because she is concerned about complaints from her customers. You are unable to satisfy yourself about accounts receivable by other audit procedures and you are concerned about Tracy’s true motives.\t\u00a0\t\u00a0\te. On January 31, Asare Toy Manufacturing hired your firm to audit the company’s financial statements for the prior year. You were unable to observe the client’s inventory on December 31. However, you were able to satisfy yourself about the inventory balance using other auditing procedures.\t\u00a0\tf. Gelato Bros., Inc., leases its manufacturing facility from a partnership controlled by the chief executive officer and major shareholder of Gelato. Your review of the lease indicates that the rental terms are in excess of rental terms for similar buildings in the area. The company refuses to disclose this related-party transaction in the footnotes.\t\u00a0\tg. Johnstone Manufacturing Company has used the double-declining balance method to depreciate its machinery. During the current year, management switched to the straight-line method because it felt that it better represented the utilization of the assets. You concur with its decision. All information is adequately disclosed in the financial statements.\t\u00a0\t16.\tIn which section of the standard audit report does the auditor inform financial statement users that certain information, such as combining statements or budgetary comparison schedules may not have been subject to the comprehensive audit procedures?\t\u00a0\t\u00a0\tAuditor’s Opinion section.\tOther Information section\tOther Matters section.\tAuditor’s Responsibility section.\t\u00a0\t\u00a0\t17.\tAward\t\u00a0\t\u00a0\t\u00a0\t\u00a0Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 trend percentages for net sales using 2016 as the base.\t\u00a0\t\u00a0\t66.0% for 2017 and 64.6% for 2016.\t\u00a0\t54.2% for 2017 and 56.1% for 2016.\t\u00a0\t36.1% for 2017 and 40.4% for 2016.\t\u00a0\t120.3% for 2017 and 100.0% for 2016.\t\u00a0\t116.2% for 2017 and 100.0% for 2016.\t2017: $279,200 \/ $232,000 \u00d7 100 = 120.3%\t2016: $232,000 \/ $232,000 \u00d7 100 = 100.0%\t\u00a0\t\u00a0\t18\t\u00a0\tA company reports basic earnings per share of $4.30, cash dividends per share of $1.65, and a market price per share of $65.15. The company’s dividend yield equals:\t2.62%.\t3.82%.\t15.50%.\t2.53%.\t6.45%.\t\u00a0\t\u00a0\t19\tRefer to the following selected financial information from McCormik, LLC. Compute the company’s days’ sales in inventory for Year 2. (Use 365 days a year.)\t\u00a0\t\u00a0\t45.2.\t\u00a0\t115.2.\t\u00a0\t49.1.\t\u00a0\t82.2.\t\u00a0\t43.6.\t\u00a0\t\u00a0\t\u00a0\t\u00a0\t\u00a0\t20\tCapital assets used by an enterprise fund should be accounted for in the\t\u00a0\t\u00a0\tBusiness-type activities journal but no depreciation on the capital assets should be recorded.\tGovernmental activities journal and depreciation on the capital assets should be recorded.\tEnterprise fund but no depreciation on the capital assets should be recorded.\tEnterprise fund and depreciation on the capital assets should be recorded.\t\u00a0\t\u00a0\t\u00a0\t21.\u00a0\t\u00a0\tFor each of the following definitions, indicate the key term from the list that best matches by placing the appropriate terms.\t\u00a0\t\u00a0\t\u00a0\t22.\t\u00a0\tWhich of the following statements regarding audit findings is true?\t\u00a0\tA material weakness is a deficiency in internal control important enough to merit attention by those charged with governance.\tAll of the above are true.\tA deficiency exists when the design or operation of a control does not allow management or employees to prevent, or detect and correct misstatements on a timely basis.\tA significant deficiency is a deficiency in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.\t\u00a0\t\u00a0\t23.\tWhich of the following would be reported as a nonspendable fund balance?\t\u00a0\t\u00a0\tAssets whose use is limited.\tRestricted assets.\tCapital assets.\tInventory.\t\u00a0\t\u00a0\t24.\tFor the following items that require reconciliation between governmental funds financial statements and governmental activities financial statements at the government-wide level according to GASB standards, indicate which is the best appropriate terms.\t\u00a0\tA) Always be subtracted from fund balances\u2014governmental funds.\tB) Always be added to fund balances\u2014governmental funds\tC) May be added to or subtracted from fund balances\u2014governmental funds in arriving at net position of governmental activities. \t\u00a0\t\u00a0\t25.\tMartinez Corporation reported Net sales of $777,000 and Net income of $130,000. The Profit margin is:\t\u00a0\t83.27%.\t\u00a0\t1.67%.\t\u00a0\t5.98%.\t\u00a0\t598.0%.\t\u00a0\t16.73%.\t\u00a0\t\u00a0\t\u00a0\t\u00a0\t26.\tSelected current year company information follows:\t\u00a0\t\u00a0\t\u00a0\t27.\t\u00a0\tSome governments provide to their citizens highly condensed financial information, budget summaries, and narrative descriptions. This report is called a(an)\t\u00a0\tPopular report.\tRequired supplementary information.\tBasic financial statements.\tComprehensive annual financial report.\t\u00a0\t28.\tA corporation reported cash of $25,600 and total assets of $454,000 on its balance sheet. Its common-size percent for cash equals:\t\u00a0\t5.64%.\t\u00a0\t100.00%.\t\u00a0\t17.73%.\t\u00a0\t1773%.\t\u00a0\t56.40%.\t\u00a0\t\u00a0\t\u00a0\t29.\tRefer to the following selected financial information from Shakley’s Incorporated. Compute the company’s profit margin for Year 2.\t\u00a0\t17.1%.\t32.5%.\t9.8%.\t14.2%.\t12.1%.\t\u00a0\t\u00a0\t30.\tAn organization that has not published financial accounting standards is the:\t\u00a0\tInstitute of Chartered Accountants.\tEmerging Issues Committee.\tCertified Management Accountants of Canada.\tInternational Accounting Standards Committee.<\/p>\n","protected":false},"excerpt":{"rendered":"
1. An unmodified audit opinion rendered on a governmental unit’s basic financial statements means those statements: \u00a0 Have been certified as free from error. Present the entity’s financial position fairly in conformity with GAAP. Did not require modifications by the Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-199654","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/199654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=199654"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/199654\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=199654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=199654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=199654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}