Answered: Most of the professional accountants…

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 16MCQ

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Most of the professional accountants support Historical cost accounting over the Current cost accounting. As per the statements given evaluate their agreement in support of historical cost accounting

I) The amounts are reliable, they can always be verified, and they exist on invoices and documents.

II) The amounts in the statement of financial position can be matched perfectly with the amounts in the statement of cash flows.

III) In times of rising prices, the conventional system of accounts based on historical cost does not give a true and fair view of the business enterprise

IV) Historical cost is basically verifiable; this minimizes the risk of manipulation of figures by the managers.

Statements I, III and IV

Statement I, II and IV

Statements I, II, III and IV

Statements I, II and III

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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