Case 1-4 generally accepted accounting principles

Case 1-4 Generally Accepted Accounting Principles
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Unformatted text preview: 1. Case 1-4 Generally Accepted Accounting Principles 2. At the completion of the Darby Department Store audit, the president asks about the meaning of the phrase in conformity with generally accepted accounting principles, which appears in your audit report on the managements financial statements. He observes that the meaning of the phrase must include more than what he thinks of as principles. Required: a. Explain the meaning of the term accounting principles as used in the audit report. (Do not in this part discuss the significance of generally accepted.) Accounting principles establish guidelines for the accounting profession to follow when preparing the financial statements, which guide an accountant in the correct way to record and depreciate assets, record revenue and expenses and when to record these transactions. Accounting principles follow the objectives of accounting so the financial statements are prepared accurately and show a true statement of the financial position of a company and its performance to interested parties. ...
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