17 Questions
How do external auditors contribute to financial statement analysis?
External auditors render opinions about the fairness of financial statements.
What role do internal auditors play in analyzing financial statements?
Internal auditors analyze asset efficiency with various turnover measures.
How can external auditors utilize asset turnover ratios in their analysis?
External auditors can use asset turnover ratios to assess the reasonableness of management's asset account balances.
What is the purpose of government agencies analyzing financial statements?
Government agencies analyze financial statements as part of their regulatory duties to protect the public by ensuring complete and accurate information.
How do government analysts assist in regulating specific industries?
Government analysts assist in regulating specific industries by overseeing compliance and ensuring adherence to industry standards.
Why is it important for auditors to be independent in rendering opinions about financial statements?
Auditors need to be independent to provide unbiased and objective assessments of financial statements.
What is the primary source of financial information that financial statement analysts heavily rely on?
Mandated disclosures
What does an unqualified audit report indicate about a company's financial statements?
Conformance to GAAP
What types of audit reports may signal analysts to closely monitor certain items or avoid the company altogether?
Qualified, Adverse, Disclaimer of an audit opinion report
What do unqualified audit opinions signal to financial statement analysts?
Confidence in the reliability of the financial statements
Why do corporations usually provide an annual report to their shareholders?
To inform shareholders about the company's financial performance
What should financial statement analysts do when a company's financial statements receive an adverse opinion or disclaimer?
Financial statement analysts should not evaluate companies whose auditors have expressed such opinions.
When auditors resign from an engagement, what signal does it send to financial statement analysts?
Financial statement analysts should be wary of analyzing a company whose auditors resign from the engagement.
Why do auditors add explanatory language to an audit report when a company receives anything but an unqualified opinion?
To explain the matters of concern that led to the non-unqualified opinion.
What should financial statement analysts pay close attention to in an audit opinion?
Analysts must pay close attention to the explanatory language in an audit opinion.
When auditors express doubt about a firm's ability to continue as a going concern, what does it indicate?
It indicates that the auditors doubt the company's ability to continue operations indefinitely due to significant economic problems.
What external factors can assist financial statement analysts in their analysis besides the audit report?
Management and auditor disclosures can complement the external audit report.
Learn about the role of external auditors who are independent CPAs responsible for ensuring that financial statements adhere to accounting principles. Explore how both external and internal auditors analyze financial statements in Spring 2024 course.
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