The controller of a small utility company has interviewed audit firms proposing to perform the annual audit of their employee benefit plan. According to the guidelines of the Department of Labor (DOL), the selected auditor must be
(A)The firm that proposes the lowest fee for the work required.
(B)Independent for purposes of examining financial information required to be filed annually with the DOL.
(C)Included on the list of firms approved by the DOL.
(D)Independent of the utility company and NOT relying on its services.
In the statement of owner’s equity, owner’s equity or capital is calculated using: Mark one answer:
(A)Gross income (B)The positive or negative cash flow figure from the statement of cash flows (C)Assets (D)Total income from operating activities (E)Net income
Correct Answer: E
Doug’s Doohickeys sells hardware. His sales have finally reached $1,000,000 annually after years of hard work. Now his accountant has discovered a mistake-Doug misclassified a $2 expense several months ago. His accountant decides to ignore it. What accounting concept does he use to justify this? Mark one answer:
(A)The going concern concept (B)The materiality concept (C)The money measurement concept (D)The matching concept (E)The time is money concept
Correct Answer: B
If equipment is used by a corporation in its operations and is sold at a loss, under which section on the statement of cash flows is this reported? Mark one answer:
(A)Operating (B)Investing (C)Financing (D)Supplemental (E)It is not reported on the statement of cash flows.
Correct Answer: A
More CPA Exam Questions
- 1King, CPA, was engaged to audit the financial statements of Newton Company after its fiscal year had ended. King neither observed the inventory count nor confirmed the receivables by direct communication with debtors, but was satisfied concerning both after applying alternative procedures.King’s auditor’s report most likely contained a(n)
- 2A tax return preparer may disclose or use tax return information without the taxpayer’s consent to
- 3What are the CPA Exam Blueprints?
- 4Cartman's Cats has $1,000,000 in assets after purchasing Big Bertha's Birds, along with $500,000 in liabilities. It has 500 shares capital stock outstanding. What is the book value of each share of stock? Mark one answer:
- 5Larry the Lawyer is going to represent Bart's Brewskies in an upcoming litigation. Bart is being sued for representing his brewskies as being non-alcoholic, when in fact, they were 80-proof. Larry has asked Bart for a retainer of $1,000 before he'll even meet with Bart. Assuming the accrual basis of accounting is in play, that $1,000 is considered (for Larry): Mark one answer: