A Ownership And Business Standards Questionnaire

1.

There are ten generally accepted auditing standards, divided into three categories. What are the general standards?

2.

Distinguish between generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP). What professional organization establishes GAAS? What professional organization establishes GAAP?

3.

Assume you are the partner in charge of the audit of Franklin Corporation's 2005 financial statements. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate opinion you should issue and why you would issue that opinion.

Franklin Corporation carries its property, plant, and equipment accounts at current market values. Current market values exceed historical cost by a highly material amount, and the effects are pervasive throughout the financial statements.

Management of Franklin Corporation refuses to allow you to observe, or make, any counts of inventory. The recorded book value of inventory is highly material.

You were unable to confirm accounts receivable with Franklin's customers. However, because of detailed sales and cash receipts records, you were able to perform reliable alternative audit procedures.

4.

What is a Limited Liability Company (LLC), which is concerned with ownership structures. Explain in detail.

5.

Principle of Utmost Good Faith or “uberrimae fidei” in Latin, can be considered a general principle of GAAP.

A.

True
B.

False

Correct Answer
A. True

Explanation
The principle of Utmost Good Faith or "uberrimae fidei" is a fundamental principle in insurance contracts, requiring both parties to act honestly and disclose all relevant information. While it is not specifically a principle of GAAP (Generally Accepted Accounting Principles), it is a principle that aligns with the general concept of transparency and honesty in financial reporting. Therefore, the statement that it is a general principle of GAAP is true.

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6.

The International Financial Reporting Standards (IFRS) is a set of accounting standards developed by an independent, not-for-profit organization called:

A.

United Nations Conference on Trade and Development (UNCTAD)
B.

Bureau of Business Standards Management (BBSM)
C.

International Accounting Standards Board (IASB)
D.

None of the above

Correct Answer
C. International Accounting Standards Board (IASB)

Explanation
The International Financial Reporting Standards (IFRS) is developed by the International Accounting Standards Board (IASB), which is an independent, not-for-profit organization. The IASB is responsible for setting and promoting the adoption of IFRS, which are a set of globally recognized accounting standards used by companies to prepare and present their financial statements. The other options, United Nations Conference on Trade and Development (UNCTAD) and Bureau of Business Standards Management (BBSM), are not the correct answer as they are not the organizations responsible for developing IFRS.