fin 432 test 1 - Test 1 Be familiar with the concepts and...

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Test 1 Be familiar with the concepts and principles of going concern, natural business year, realization, conservatism (e.g., lower-of-cost-or-market), and the matching principle. Going concern principle – assumes that the entity being accounted fro will remain in business for an indefinite period of time. Natural Business year – A 12-month period ending on a date that coincides with the end of an operating cycle Realization – A concept that generally recognizes revenue when (1) the earning process is virtually complete and (2) the exchange value can be objectively determined Conservatism – The concept that directs that the measurement with the least favorable effect on net income and financial position in the current period be selected. Lower of cost or market – a method to value inventories and marketable securities Matching principle – The concept that determines the revenue and then matches the appropriate cost incurred in generating this revenue Know the responsibility of management for the financial statements. • Management is responsible for … – preparation of financial statements – integrity of financial statements • Management’s statement of responsibility usually included in the annual report Be familiar with the SEC’s Integrated Disclosure System. pg 56 •10-K: annual filing (audited) – Financial statements plus management discussion and analysis and other material information about the company, its directors, executive officers, and their compensation, and any related party transactions • 10-Q: quarterly filing (unaudited) • 8-K: “current report” – Reports occurrences of any material events or corporate changes
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Be familiar with the different types of audit opinions . Pg 52 Unqualified – highest degree of reliability – Statements prepared by management have been audited and the internal controls assessed, and Statements present fairly the financial position, results of operations, and cash flows of entity in conformity with GAAP Exceptions to unqualified opinion
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fin 432 test 1 - Test 1 Be familiar with the concepts and...

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