Financial Statement Analysis quiz Financial Accounting Quiz بواسطة admin في سبتمبر 16, 2023 0 INTRODUCTION TO FINANCIAL STATEMENT ANALYSIS QUES Introduction to Financial Statement Analysis 1 / 60 A company’s financial position would best be evaluated using the: A) income statement B) statement of cash flows C) balance sheet The balance sheet portrays the company’s financial position on a specified date. The income statement and statement of cash flows present different aspects of performance during the period. 2 / 60 Which of the following best describes the role of financial statement analysis ? A) To form expectations about a company’s future performance and financial position B) To provide information about a company’s performance C) To provide information about a company’s changes in financial position In general, analysts seek to examine the past and current performance and financial position of a company in order to form expectations about its future performance and financial position. 3 / 60 The role of financial statement analysis is best described as : A) evaluating a company for the purpose of making economic decisions B) using financial reports prepared by analysts to make economic decisions C) providing information useful for making investment decisions The primary role of financial statement analysis is to use financial reports prepared by companies to evaluate their past, current, and potential performance and financial position for the purpose of making investment, credit, and other economic decisions. 4 / 60 The step in the financial statement analysis framework of "processing the data" is least likely to include which activity? A) Acquiring the company’s financial statements B) Making appropriate adjustments to the financial statements C) Preparing exhibits such as graphs The financial statement analysis framework consists of six steps. Step 2: "Gather data" includes acquiring the company's financial statements and other relevant data on its industry and the economy. Step 3. "Process the data" includes activities such as making any appropriate adjustments to the financial statements and preparing exhibits such as graphs and common-size balance sheets. 5 / 60 Which of the following is an analyst least likely to rely on as objective information to include in a company analysis ? A) Proxy statements B) Corporate press releases C) Government agency statistical data on the economy and the company’s industry Corporate reports and press releases are written by management and are often viewed as public relations or sales materials. An analyst should review information on the economy and the company's industry and compare the company to its competitors. This information can be acquired from sources such as trade journals, statistical reporting services, and government agencies. Securities and Exchange Commission (SEC) filings include Form 8-K, which a company must file to report events such as acquisitions and disposals of major assets or changes in its management or corporate governance and proxy statements, which are a good source of information about the election of (and qualifications of) board members, compensation, management qualifications, and the issuance of stock options. 6 / 60 The role of financial statement analysis is most accurately described as : A) the reports and presentations a company uses to show its financial performance to investors, creditors, and other interested parties B) the use of information from a company’s financial statements along with other information to make economic decisions regarding that company C) a common requirement for companies that are listed on public exchanges Financial statement analysis refers to the use of information from a company's financial statements along with other information to make economic decisions regarding that company. Financial reporting refers to the reports and presentations that a company uses to show its financial performance to investors, creditors, and other interested parties. Financial reporting is a requirement for companies that are listed on public exchanges . 7 / 60 The standard auditor's report is most likely required to : A) provide reasonable assurance that management is reliable B) provide reasonable assurance that the financial statements contain no material errors C) provide an "unqualifed" opinion if material uncertainties exist The standard auditor's report contains three parts : The financial statements are prepared by management and are their responsibility and the auditor has performed an independent review. The audit was conducted using generally accepted auditing standards, which provides reasonable assurance that there are no material errors in the financial statements . The auditor is satisfied the statements were prepared in accordance with accepted accounting principles, and the principles chosen and estimates are reasonable . Under U.S. GAAP, the auditor is required to state an opinion on the company's internal controls. The auditor may add this opinion as a fourth element of the auditor's report or provide it separately . 8 / 60 Updated information on a company’s performance and financial position since the last annual report is most likely found in : A) proxy statements B) interim reports C) management discussion and analysis Interim reports, either quarterly or semi-annual, contain updated information on a company’s performance and financial position since the last annual report. (management discussion and analysis) is incorrect . The MD&A is part of the annual report and is not an update since the last annual report . (proxy statements) is incorrect . Proxy statements contain information about matters that will be put to a vote at shareholders’ meetings . 9 / 60 Which of the following best describes why the notes that accompany the financial statements are required ? The notes : A) provide information necessary to understand the financial statements B) standardize financial reporting across companies C) permit flexibility in statement preparation The notes provide information that is essential to understanding the information provided in the primary statements. 10 / 60 According to the IASB, which of the following least accurately describes financial reporting? Financial reporting : A) is useful to a wide range of users B) provides information about changes in financial position of an entity C) uses the information in a company’s financial statements to make economic decisions The role of financial reporting is described by the International Accounting Standards Board (IASB) in its "Framework for the Preparation and Presentation of Financial Statements" : The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions . Using the information in a company's financial statements to make economic decisions is financial analysis, not financial reporting . 11 / 60 A company’s profitability for a period would best be evaluated using the : A) statement of cash flows B) balance sheet C) income statement Profitability is the performance aspect measured by the income statement. The balance sheet portrays the financial position. The statement of cash flows presents a different aspect of performance. 12 / 60 Information about management and director compensation are least likely to be found in the : A) auditor’s report B) proxy statement C) notes to the financial statements Information about management and director compensation is not found in the auditor’s report. Disclosure of management compensation is required in the proxy statement, and some aspects of management compensation are disclosed in the notes to the financial statements. 13 / 60 Information about elections of members to a company’s Board of Directors is most likely found in : A) a proxy statement B) footnotes to the financial statements C) a 10-Q filing Proxy statements contain information related to matters that come before shareholders for a vote, such as elections of board members . 14 / 60 A company's operating revenues for a reporting period are most likely to be shown on its : A) cash flow statement B) income statement C) balance sheet Revenues for a reporting period are presented on a company's income statement. They can be, but are not required to be, classified as operating and nonoperating revenues. Cash from operating activities is presented on the company's statement of cash flows, but this is not necessarily equal to operating revenues because revenue might be recognized in a different period than cash is collected. The balance sheet displays a company's financial position at a fixed point in time . 15 / 60 The step in the financial statement analysis framework that includes making any appropriate adjustments to the financial statements and calculating ratios is best described as: A) processing the data B) analyzing and interpreting the data C) gathering the data The financial statement analysis framework consists of six steps : 1. State the objective and context. Determine what questions the analysis is meant to answer, the form in which it needs to be presented, and what resources and how much time are available to perform the analysis. 2. Gather data. Acquire the company's financial statements and other relevant data on its industry and the economy. Ask questions of the company's management, suppliers, and customers, and visit company sites. 3. Process the data. Make any appropriate adjustments to the financial statements. Calculate ratios. Prepare exhibits such as graphs and common-size balance sheets. 4. Analyze and interpret the data. Use the data to answer the questions stated in the first step. Decide what conclusions or recommendations the information supports. 5. Report the conclusions or recommendations. Prepare a report and communicate it to its intended audience. Be sure the report and its dissemination comply with the Code and Standards that relate to investment analysis and recommendations. 6. Update the analysis. Repeat these steps periodically and change the conclusions or recommendations when necessary. 16 / 60 Which financial statement reports information about a company's financial position at a single point in time ? A) balance sheet B) cash flow statement C) income statement The balance sheet reports a company's financial position at a point in time. In contrast, the income statement and the cash flow statement report a company's financial performance over a reporting period . 17 / 60 For publicly traded firms in the United States, the Management Discussion and Analysis (MD&A) portion of the financial disclosure is least likely required to discuss : A) unusual or infrequent items B) results of operations C) capital resources and liquidity For publicly traded U.S. firms, the MD&A portion of the financial disclosure is required to discuss results of operations, capital resources and liquidity and a general business overview based on known trends. A discussion of unusual or infrequent items may be included in the MD&A, but is not required . 18 / 60 A firm’s financial position at a specific point in time is reported in the : A) cash flow statement B) balance sheet C) income statement The balance sheet reports a company’s Financial position as of a specific date. The income statement, cash flow statement, and statement of changes in owners’ equity show the company’s performance during a specific period . 19 / 60 Providing information about the performance and financial position of companies so that users can make economic decisions best describes the role of : A) auditing B) financial reporting C) financial statement analysis This is the role of financial reporting. The role of financial statement analysis is to evaluate the financial reports. 20 / 60 According to IFRS guidance for management's commentary, addressing the company's key relationships is : A) recommended B) neither recommended nor required C) required IFRS recommends that management commentary address the company's key relationships, resources, and risks, as well as the nature of the business, management's objectives, the company's past performance, and the performance measures used. Securities regulators may impose requirements for publicly traded firms to address certain topics in management's commentary, but accounting standards do not . 21 / 60 What type of audit opinion is preferred when analyzing financial statements ? A) Qualified B) Unqualified C) Adverse An unqualified opinion is a “clean” opinion and indicates that the financial statements present the company’s performance and financial position fairly in accordance with a specified set of accounting standards . 22 / 60 The financial statement that presents a shareholder’s residual claim on assets is the : A) cash flow statement B) balance sheet C) income statement Owners’ equity is the owners’ residual interest in (i.e., residual claim on) the company’s assets after deducting its liabilities, which is information presented on the balance sheet . 23 / 60 Which of the following is an independent auditor least likely to do with respect to a company's financial statements? A) Prepare and accept responsibility for them B) Confirm assets and liabilities contained in them C) Provide an opinion concerning their fairness and reliability Auditors make an independent review of financial statements, which are prepared by company management and are management's responsibility. It is the responsibility of auditors to confirm the assets, liabilities, and other items included in the statements and then issue an opinion concerning their fairness and reliability. 24 / 60 Which of the following is least likely to be available on EDGAR (Electronic Data Gathering, Analysis, and Retrieval System) ? A) Form 10Q B) SEC filings C) Corporate press releases Securities and Exchange Commission (SEC) filings are available from EDGAR (Electronic Data Gathering, Analysis, and Retrieval System, www.sec.gov). Companies' annual and quarterly financial statements are also filed with the SEC (Form 10-K and Form 10-Q, respectively) . 25 / 60 Common-size financial statements are most likely a component of which step in the financial analysis framework ? A) Collect data B) Analyze/interpret data C) Process data Preparing common-size financial statements is part of the process data step. (Collect data) is incorrect. The financial statements are obtained in the collect data step, but not converted into common-size statements until the process step. (Analyze/interpret data) is incorrect. Preparing common-size financial statements is part of the process data stage, after which the analyst will analyze/interpret the processed data. 26 / 60 Which of the following statements is most accurate about the responsibilities of an auditor for a publicly traded firm in the United States? The auditor must : A) state that the financial statements are prepared according to generally accepted accounting principles B) ensure that the financial statements are free from error, fraud, or illegal acts C) express an opinion about the effectiveness of the company’s internal control systems For a publicly traded firm in the United States, the auditor must express an opinion as to whether the company’s internal control system is in accordance with the Public Accounting Oversight Board, under the Sarbanes–Oxley Act. The opinion is given either in a final paragraph in the auditor’s report or as a separate opinion. (state that the financial statements are prepared according to generally accepted accounting principles) is incorrect. The statements are those prepared by management, not the auditor. The auditor is expressing an opinion as to whether the statements are fairly presented and free from material error. (ensure that the financial statements are free from error, fraud, or illegal acts) is incorrect. The auditor only provides reasonable assurance that the statements are free from material error. 27 / 60 Which phase in the financial statement analysis framework is most likely to involve producing updated reports and recommendations? A) Develop and communicate conclusions and recommendations B) Follow-up C) Analyze/interpret the processed data The follow-up phase involves gathering information and repeating the analysis to determine whether it is necessary to update reports and recommendations. 28 / 60 In addition to the audited financial statements included in a firm's annual report, which of the following sources of information is most likely to contain audited data ? A) Interim financial statements filed with the SEC B) Management’s commentary C) Footnotes to the annual financial statements The footnotes are an integral part of the audited financial statements in a firm's annual report and are included in the audit opinion . 29 / 60 Which of the following statements least accurately describes a role of financial statement analysis ? A) Provide reasonable assurance that the financial statements are free of material errors B) Evaluate an entity’s financial position and past performance to form opinions about its future ability to earn profits and generate cash flow C) Use the information in financial statements to make economic decisions This statement describes the role of an auditor, rather than the role of an analyst. The other responses describe the role of financial statement analysis . 30 / 60 Information about accounting estimates, assumptions, and methods chosen for reporting is most likely found in : A) financial statement notes B) Management’s Discussion and Analysis C) the auditor’s opinion Information about accounting methods and estimates is contained in the footnotes to the financial statements . 31 / 60 The income statement is best used to evaluate a company’s : A) sources of cash flow B) financial results from business activities C) financial position A company’s revenues and expenses are presented on the income statement, which is used to evaluate a company’s financial results (or profitability) from business activities over a period of time. A company’s financial position is best evaluated by using the balance sheet. A company’s sources of cash flow are best evaluated using the cash flow statement. 32 / 60 Which of the following statements represents information at a specific point in time ? A) The income statement and the balance sheet B) The balance sheet C) The income statement The balance sheet represents information at a specific point in time. The income statement represents information over a period of time . 33 / 60 Ratios are an input into which step in the financial statement analysis framework ? A) Analyze/interpret the processed data B) Process data C) Collect input data Ratios are an output of the process data step but are an input into the analyze/interpret data step . 34 / 60 A firm's internal controls are most accurately described as : A) outside the scope of an audit report under IFRS and U.S. GAAP B) directly affecting the firm’s financial reporting quality C) a responsibility of the firm’s board of directors Weak internal controls provide an opportunity for low-quality or even fraudulent financial reporting. A firm's management, not its board of directors, is responsible for ensuring the effectiveness of a firm's internal controls. Under U.S. GAAP, auditors are required to state an opinion on a firm's internal controls. 35 / 60 Which of the following statements concerning the notes to the audited financial statements of a company is least accurate ? Financial statement notes : A) include management's assessment of the company's operating performance and financial results B) are audited C) contain information about contingent losses that may occur Management's perspective on the company's results is provided in the Management's Discussion and Analysis supplement to the financial statements. Financial statement notes (footnotes) provide information about matters such as the company's accounting methods and assumptions, contingencies, and acquisitions and disposals. Footnotes to the financial statements are audited . 36 / 60 Which of these steps is least likely to be a part of the financial statement analysis framework ? A) Adjust the financial statement data and compare the company to its industry peers B) Determine whether the company’s securities are suitable for the client C) State the purpose and context of the analysis Determining the suitability of an investment for a client is not one of the six steps in the Financial statement analysis framework. The analyst would only perform this function if he also had an advisory relationship with the client. Stating the objective and processing the data are two of the six steps in the framework. The others are gathering the data, analyzing the data, updating the analysis, and reporting the conclusions . 37 / 60 Information about a company’s objectives, strategies, and significant risks are most likely to be found in the : A) auditor’s report B) management commentary C) notes to the financial statements These are components of management commentary. 38 / 60 Which of the following is least likely to be considered a role of financial statement analysis ? A) Determining whether to invest in the company's securities B) To make economic decisions C) Assessing the management skill of the company’s executives The role of financial statement analysis is to use the information in a company's financial statements, along with other relevant information, to make economic decisions. Examples of such decisions include whether to invest in the company's securities or recommend them to other investors, or whether to extend trade or bank credit to the company. Although the financial statements might provide indirect evidence about the management skill of the company's executives, that is not generally considered the role of financial statement analysis . 39 / 60 Which of the following statements about proxy statements is least accurate? Proxy statements are: A) available on the EDGAR web site B) a good source of information about the qualifications of board members and management C) not filed with the SEC Proxy statements are issued to shareholders when there are matters that require a shareholder vote. These statements, which are also filed with the SEC and available from EDGAR, are a good source of information about the election of (and qualifications of) board members, compensation, management qualifications, and the issuance of stock options. 40 / 60 Which of the following is the best description of the financial statement analysis framework? A) Gather data, analyze and interpret the data, process the conclusions, assess the context, report the recommendations, update the analysis B) State the objective and context, gather data, process the data, analyze and interpret the data, report the conclusions or recommendations, update the analysis C) Gather data, analyze and interpret the data, determine the context, report the conclusions, update the analysis The financial statement analysis framework consists of six steps : 1. State the objective and context. 2. Gather data. 3. Process the data. 4. Analyze and interpret the data. 5. Report the conclusions or recommendations. 6. Update the analysis. 41 / 60 In the financial statement analysis framework, using the data to address the objectives of the analysis and deciding what conclusions or recommendations the information supports is best described as: A) reporting the conclusions B) analyzing and interpreting the data C) processing the data The financial statement analysis framework consists of six steps : 1. State the objective and context. Determine what questions the analysis is meant to answer, the form in which it needs to be presented, and what resources and how much time are available to perform the analysis. 2. Gather data. Acquire the company's financial statements and other relevant data on its industry and the economy. Ask questions of the company's management, suppliers, and customers, and visit company sites. 3. Process the data. Make any appropriate adjustments to the financial statements. Calculate ratios. Prepare exhibits such as graphs and common-size balance sheets. 4. Analyze and interpret the data. Use the data to answer the questions stated in the first step. Decide what conclusions or recommendations the information supports. 5. Report the conclusions or recommendations. Prepare a report and communicate it to its intended audience. Be sure the report and its dissemination comply with the Code and Standards that relate to investment analysis and recommendations. 6. Update the analysis. Repeat these steps periodically and change the conclusions or recommendations when necessary. 42 / 60 Which of the following best describes financial reporting and financial statement analysis? A) ) The objective of financial analysis is to provide information about the financial position of an entity that is useful to a wide range of users B) Financial reporting refers to how companies show their financial performance and financial analysis refers to using the information to make economic decisions C) Financial reports assess a company’s past performance in order to draw conclusions about the company’s ability to generate cash and profits in the future Financial reporting refers to the way companies show their financial performance to investors, creditors, and other interested parties by preparing and presenting financial statements. The objective of financial statements, not analysis, is to provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions. The role of financial statement analysis, not reporting, is to use the information in a company's financial statements, along with other relevant information, to assess a company's past performance in order to draw conclusions about the company's ability to generate cash and profits in the future. 43 / 60 An auditor determines that a company’s financial statements are prepared in accordance with applicable accounting standards except with respect to inventory reporting. This exception is most likely to result in an audit opinion that is: A) unqualified B) qualified C) adverse A qualified audit opinion is one in which there is some scope limitation or exception to accounting standards. Exceptions are described in the audit report with additional explanatory paragraphs so that the analyst can determine the importance of the exception. 44 / 60 Interim financial reports released by a company are most likely to be : A) unqualified B) unaudited C) monthly Interim reports are typically provided semiannually or quarterly and present the four basic financial statements and condensed notes. They are not audited. Unqualified is a type of audit opinion . 45 / 60 Which of the following sources of information used by analysts is found outside a company’s annual report? A) Peer company analysis B) Auditor’s report C) Management’s discussion and analysis When performing financial statement analysis, analysts should review all company sources of information as well as information from external sources regarding the economy, the industry, the company, and peer (comparable) companies . 46 / 60 An analyst’s examination of the performance of a company is least likely to include an assessment of a company’s : A) cash flow generating ability B) profitability C) assets relative to its liabilities Assessment of performance includes analysis of profitability and cash flow generating ability. The relationship between assets and liabilities is used to assess a company’s financial position, not its performance. (profitability) is incorrect. Assessment of performance includes analysis of profitability. (cash flow generating ability) is incorrect. Assessment of performance includes analysis of cash flow generating ability. 47 / 60 If an auditor finds that a company’s financial statements have made a specific exception to applicable accounting principles, she is most likely to issue a : A) dissenting opinion B) qualified opinion C) cautionary note auditor will issue a qualified opinion if the financial statements make any exceptions to applicable accounting standards and will explain the effect of these exceptions in the auditor’s report . 48 / 60 Providing information about the performance of a company, its financial position, and changes in financial position that is useful to a wide range of users is most accurately described as the role of : A) financial statement analysis B) financial reporting C) the audit report The role of financial reporting is to provide information about the performance of a company, its financial position, and changes in financial position that is useful to a wide range of users in making economic decisions. (the audit report) is incorrect. Audit reports express an opinion about the fair presentation of the financial statements. (financial statement analysis) is incorrect. The role of financial statement analysis is to take the financial reports and evaluate the past, current, and prospective performance and financial position of a company for the purpose of making investment, credit, and other economic decisions . 49 / 60 A company’s profitability over a period of time is best evaluated using the: A) balance sheet B) cash flow statement C) income statement A company’s profitability is best evaluated using the income statement. The income statement presents information on the financial results of a company’s business activities over a period of time by communicating how much revenue was generated and the expenses incurred to generate that revenue . 50 / 60 Interim reports most likely : A) are issued semi-annually or quarterly B) include a full set of financial statements and notes C) are audited Interim reports are provided semi-annually or quarterly, depending on applicable regulatory requirements. (are audited) is incorrect. Interim reports are not audited. (include a full set of financial statements and notes) is incorrect. Interim reports generally present the four basic financial statements and condensed notes. 51 / 60 Accounting policies, methods, and estimates used in preparing financial statements are most likely to be found in the : A) auditor’s report B) notes to the financial statements C) management commentary The notes disclose choices in accounting policies, methods, and estimates . 52 / 60 Which of the following statements regarding footnotes to the financial statements is least accurate? Financial statement footnotes: A) provide information about assumptions and estimates used by management B) may contain information regarding contingent losses C) typically include a discussion of the firm’s past performance and future outlook Discussion of a firm's past performance and future outlook is most likely to be found in management's commentary. 53 / 60 Which of the following most likely results in an increase of owners’ equity ? A) Cash dividend B) New equity issuance C) Share repurchase The basic components of owners’ equity are paid-in capital and retained earnings. In the paid-in capital account, an example of an increase in owners’ equity is a new equity issuance. Cash dividends reduce retained earnings and owners’ equity. Share repurchases reduce paid-in capital and owners’ equity. (Share repurchase ) is incorrect because for the paid-in capital account an example of a decrease in owners’ equity is the repurchase of previously issued shares. (Cash dividend) is incorrect because a cash dividend payment is the most common cause of a decrease in owners’ equity. 54 / 60 Which of the following statements about financial statement analysis and reporting is least accurate ? A) Financial statement analysis focuses on the way companies show their financial performance to investors by preparing and presenting financial statements B) Deciding whether to recommend a company’s securities to investors is a role of financial statement analysis C) Providing information about changes in a company’s financial position is a role of financial reporting Financial reporting refers to the way companies show their financial performance to investors, creditors, and other interested parties by preparing and presenting financial statements, including information about changes in a company's financial position. The role of financial statement analysis is to use the information in a company's financial statements, along with other relevant information, to make economic decisions, such as whether to invest in the company's securities or recommend them to other investors. Analysts use financial statement data to evaluate a company's past performance and current financial position in order to form opinions about the company's ability to earn profits and generate cash flow in the future . 55 / 60 Reviewing the MD&A section of an annual report is important because : A) future revenue projections must be disclosed B) accounting policies may require subjective judgment by management C) management commentary is typically unaudited Companies should disclose in management commentary any critical accounting policies that require management to make subjective judgements that may have a significant impact on reported financial results. These subjective judgements should be carefully reviewed because they may materially alter an analyst’s conclusions about the future performance or financial position of a company (future revenue projections must be disclosed) is incorrect because companies are not required to disclose future revenue projections in the management’s discussion and analysis section of financial statements, but should highlight any favorable or unfavorable trends or uncertainties that may impact future performance or financial position. (management commentary is typically unaudited) is incorrect because although management commentary is typically unaudited, it is not a reason why management commentary is of importance to analysts. Rather, analysts should be aware that management commentary is unaudited and interpret accordingly. 56 / 60 Which of the following would NOT require an explanatory paragraph added to the auditors' report? A) Doubt regarding the "going concern" assumption B) Statements that the financial information was prepared according to GAAP C) Uncertainty due to litigation The statements that the financial information was prepared according to GAAP should be included in the regular part of the auditors' report and not as an explanatory paragraph. The other information would be contained in explanatory paragraphs added to the auditors' report. 57 / 60 For a company issuing securities in the United States to meet its obligations under the Sarbanes–Oxley Act, which of the following is management required to attest to ? A) The adequacy of internal control over financial reporting B) The suitability of management and director compensation agreements C) The accuracy of estimates and assumptions used in preparing the financial statements To be in compliance with Sarbanes–Oxley, it is mandatory that management’s Report to Shareholders discuss internal financial controls and their effectiveness, as well as the company’s auditor’s opinion of these internal controls. (The suitability of management and director compensation agreements) is incorrect. Information on management and director compensation agreements will be found in the proxy statement and/or notes to the financial statements. (The accuracy of estimates and assumptions used in preparing the financial statements) is incorrect. Estimates and assumptions used in preparing financial statements are found in the notes to the financial statements. 58 / 60 An independent audit report is most likely to provide : A) a qualified opinion with respect to the transparency of the financial statements B) reasonable assurance that the financial statements are fairly presented C) absolute assurance about the accuracy of the financial statements The independent audit report provides reasonable assurance that the financial statements are fairly presented, meaning that there is a high probability that the audited financial statements are free from material error, fraud, or illegal acts that have a direct effect on the financial statements. 59 / 60 An analyst who wants to examine a firm's financing transactions during the most recent period is most likely to evaluate the firm's statement of : A) cash flows B) Fnancial position C) comprehensive income The statement of cash flows describes a firm's inflows and outflows of cash during a reporting period from operating, investing, and financing activities. Financing transactions such as issuance of debt or stock are shown on the statement of cash flows. The statement of financial position (balance sheet) presents the firm's assets, liabilities, and equity at a point in time. The statement of comprehensive income (income statement) does not directly reflect a firm's financing transactions. Cash raised is not included in a firm's revenues and dividends paid and debt principal repaid are not included in its expenses . 60 / 60 Notes to financial statements most likely include : A) supplementary information about accounting policies, methods, and estimates B) an auditor’s opinion as to the fair presentation of the financial statements C) a discussion of significant trends, events, and uncertainties that affect the operating results The notes disclose information about the accounting policies, methods, and estimates used to prepare the financial statements. (a discussion of significant trends, events, and uncertainties that affect the operating results) is incorrect. The management commentary (or MDA), which is not part of the notes to financial statements, includes a discussion of significant trends, events, and uncertainties that affect the operating results. (an auditor’s opinion as to the fair presentation of the financial statements) is incorrect. The Auditor’s Report, which is not part of the notes to financial statements, includes the auditor’s opinion as to the fair presentation of the financial statements. Your score is LinkedIn Facebook Twitter VKontakte Send feedback accounting & financial statement analysis: complete trainingadvanced financial statement analysis trainingadvanced financial statement analysis training courseannual financial statementaudit financial statementbalance sheet financial statement 0 شارك FacebookTwitterWhatsAppPinterestLinkedinTelegram