This is “End-of-Chapter Exercises”, section 6.6 from the book Business Accounting (v. 2.0).
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Whittington and Company is a CPA firm that audits publicly traded companies in the state of Oregon. Which of the following is true concerning Whittington and Company?
Which of the following is not true about an audit report?
Which of the following is true about the Financial Accounting Standards Board (FASB)?
Which organization is a governmental entity?
Which of the following is true about the Securities and Exchange Commission (SEC)?
Which of the following is true about the PCAOB?
An independent auditor provides an unqualified opinion on the financial statements of the O’Neil Corporation. Which of the following statements is true?
Which of the following is not a reason why an auditor only provides reasonable assurance in an audit report?
Which of the following is not necessary to become a Certified Public Accountant (CPA)?
Professor Joe Hoyle discusses the answers to these two problems at the indicated links. After formulating your answers, watch each video to see how Professor Hoyle answers these questions.
Your roommate is an English major. The roommate’s parents own a chain of ice cream shops throughout Florida. One day, on the way to a psychology class, your roommate poses this question: “Each year, my parents produce a set of financial statements for their business. The statements look great. Then, after all the work is finished, they go out and hire a CPA who charges them a hefty fee. That seems like such a waste of money. The financial statements have already been prepared before the CPA ever shows up. What are they getting for their money?” How would you respond?
Your uncle and two friends started a small office supply store several years ago. The company has expanded and now has several large locations. Your uncle knows that you are taking a financial accounting class and asks you the following question: “Our growth has been moving forward very nicely. We have an excellent business that is poised to continue getting bigger. Recently, our accountant came to us and indicated that we would need to start following the rules and regulations of the Securities and Exchange Commission. I realize that this can be time consuming and costly. Why do we need to worry about the SEC now when we have not had to do so in the past?” How would you respond?
Match the following organizations to their descriptions.
Provide a short description of the role that each of the following plays in the financial reporting process.
Assume that you take a job as a summer employee for an investment advisory service. Your boss tells you that you need to learn to use the SEC Web site and EDGAR to locate information about various companies. For example, the boss wants to know whether the inventory held by PepsiCo increased or decreased between 2009 and 2010. That information will be found in the Form 10-K, which is the annual report filed by the company with the SEC. To get started, the boss jots down the following steps to find that desired piece of information. Follow the steps and determine the change. The boss also gives one more suggestion: “As you search through the Form 10-K for this company, start to notice all of the other types of information that are readily available to help us understand this company, its financial health and future prospects.”