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Unformatted text preview: ponsibility is to express an opinion on those statements Auditing involves a sampling of transactions, not investigation of each transaction Audit opinion provides reasonable assurance that the statements are free of material misstatements Auditors review accounting policies used by management and estimates used in preparing the statements Sarbanes­Oxley Act Sarbanes­Oxley Act The SEC requires the CEO and CFO of a company to personally sign a statement attesting to the accuracy and completeness of the company’s financial statements. The statements signed by both the CEO and CFO contain the following commitments: The CEO and CFO have personally reviewed the annual report There are no untrue statements of a material fact or failure to state a material fact necessary to make the statements not misleading The financial statements fairly present in all material respects the financial condition of the company All material facts are disclosed to the company’s auditors and Board of Directors No changes to the company’s system of internal controls are made unless properly communicated Financial Accounting: Financial Accounting: not an exact science GAAP allows companies choices in preparing financial statements (inventories, property, and equipment). Companies must choose among the alternatives that are acceptable under GAAP. Financial statements also depend on countless estimates. Financial Accounting in Context Financial Accounting in Context A company’s financial statements only tell part of the story. You must continually keep in mind the world in which the company operates. Financial statement analysis must be conducted within the framework of a thorough understanding of the broader forces which impact company performance....
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