L2 Notes_Part_12 - research conducted to date would...

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Lack of Consistency Discuss: GAAP, implementation, disclosure, concurrence Other information in annual report; Restatements of prior period errors
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Audit Reporting Problem During 2000, the research staff of Scientific Research Corporation devoted its entire efforts toward developing a new pollution-control device. All costs that could be attributed directly to the project were accounted for a as deferred charges and classified on the balance sheet at December 31, 2000, as a noncurrent asset. In the course of his audit of the corporation’s 2000 financial statements, Anthony, CPA, found persuasive evidence that the
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Unformatted text preview: research conducted to date would probably result in a marketable product. The deferred research charges are significantly material in relation to both income and total assets. GAAP Departures Is the departure material? Is the departure justified? Can it be compartmentalized? Qualified Report Rule 203 Report Adverse Report No GAAP departure identified Standard Report No Yes Yes No Yes Unreasonable estimate Unacceptable actg method Inappropriate application of GAAP Missing or misstated footnote Omitted SCF (except for opinion)...
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L2 Notes_Part_12 - research conducted to date would...

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