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Flashcards in Chapter 3 Deck (12):
1

What are cash equivalents?

Equivalent instruments with maturity dates of less than three months from the date of purchase

2

What is the summary of significant accounting policies?

Conveys valuable information about a company's choices from among various alternative accounting methods

3

What are subsequent events?

Occurs after a company's fiscal year end but before the financial statements are issued

4

What is the purpose of the auditor's report?

Provides final statement user with an independent and professional opinion about fairness of the representation in the financial statements, effectiveness of internal controls, and whether or not the financial statements are in conformity with GAAP

5

What is a qualified opinion?

Contains an exception to the standard unqualified opinion

6

What is an adverse opinion?

Results from (a) nonconformity with GAAP and (b) inadequate disclosures

7

What is a disclaimer?

Results from limitation or restriction of the scope of the examination

8

What is a proxy statement?

Contains disclosures on compensation to directors and executives

9

What is risk analysis?

Analysis that is used to gain a glimpse of the future from the past and present data using various tools and techniques

10

What is horizontal analysis?

Expressing each item as a percentage of that same item in the financial statements of another year

11

What is vertical analysis?

The expression of each item in the financial statements as a percentage of an appropriate corresponding total but within the same year

12

When must an enterprise report information about major customers?

If 10% or more of the revenue of an enterprise is derived from transactions with a single customer. the facts must be disclosed by the company