CFA Level I:FSA : an induction(Reading 22) 习题精选 opinion, company, about

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1. 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:

A. Assures the reader that the financial statements are free from error, fraud, or illegal acts.

B. Must express an opinion about the effectiveness of the company’s internal control systems.

C. Must state that he prepared the financial statements according to generally accepted accounting principles.

Ans: B;
B is correct. 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 Company Accounting Oversight Board, under the Sarbanes–Oxley Act. This is done either as a final paragraph in the auditor’s report or as a separate opinion.
A is incorrect. An auditor can only provide reasonable assurance that the financial statements A.    are free from error, fraud, or illegal acts.
B is incorrect. Auditors’ responsibility is to express an opinion that the financial statements are free from error, fraud, or illegal acts. Preparing the financial statement is not the responsibility.

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2. The financial statement that would be most helpful to an analyst in understanding the changes that have occurred in a company’s retained earnings over a year is the statement of:

A. changes in equity.

B. financial position.

C. comprehensive income.

  
    Ans: A;

A is correct. The statement of changes in equity reports the changes in the components of shareholders’ equity over the year, which would include the retained earnings account.

B is incorrect. The statement of financial position (Balance Sheet) reports a company’s financial position at a specific time.

C is incorrect. The statement of comprehensive income illustrates the financial performance and results of operations of a particular company or entity for a period of time.

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3. 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 reporting.

B. the auditor’s report.

C. financial statement analysis.

  
    Ans: A

A is correct. 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.

B is incorrect. The role of the auditor’s report is to provide reasonable assurance that the financial statements are free of material mistakes.

C is incorrect. The role of financial statement analysis is to help analysts or investors to make a wide array of economic decisions, including evaluating potential equity or venture capital investments, evaluating corporate division or subsidiaries and forecasting future financial performance.

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4. Information about management compensation and any potential conflicts of interest that may exist between management and shareholders is most likely found in the:

A. Proxy statement.

B. Notes to the financial statements.

C. Management discussion and analysis

  
    Ans: A

A is correct. Information about management compensation and any potential conflicts of interest that may exist between management and shareholders is typically provided in the proxy statement.

B is incorrect. Notes to the financial statement provide detailed disclosures. For example, a summary of the significant accounting policies, disclosures for most asset categories and income taxes.

C is incorrect. Management discussion and analysis includes topics: a review of the company’s consolidated operating performance and its financial condition, an assessment of the significant effects of known treads, the capital resources available to the firm and its liquidity, extraordinary or unusual events, and a review of the performance of operating segments.

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5. Which of the following is least likely to appear in a company’s proxy statement?

A. Compensation arrangements for management and directors

B. Significant event and contingencies that may affect future operations

C. Potential conflicts of interest between management, directors, and shareholders.
    Ans: B

Proxy statements are issued by publicly held companies in connection with shareholder meetings and contain useful information about board members and management, executive compensation, stock options and major shareholders.

Significant events, conditions, trends, and contingencies that may affect future operations are contained in Management’s Discussion and Analysis. Compensation agreements for directors and management and their potential conflicts of interest are required in the proxy statement.

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6. Common-size financial statements are most likely an output of which step in the financial analysis framework?

A. Collect data

B. Process data

C. Analyze/interpret data

  
    Ans: B.

The financial statement analysis framework consists of six steps:

1.  State the objective and context. Determine what questions the analysis seeks to answer, the form in which this information 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 conclusion 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.

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7. An analyst’s examination of the performance of a company is least likely to include an assessment of a company’s:

A. profitability.

B. cash flow generating ability.

C. assets relative to its liabilities.

  
    Ans: C.

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.

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8. An analyst finds information about significant uncertainties affecting a company’s liquidity, capital resources and results of operations in the:

A. notes to the financial statements.

B. balance sheet and income statement.

C. management discussion and analysis.

  
    Ans: C.

Management discussion and analysis includes topics: a review of the company’s consolidated operating performance and its financial condition, an assessment of the significant effects of known treads, the capital resources available to the firm and its liquidity, extraordinary or unusual events, and a review of the performance of operating segments.

Management must highlight any favorable and unfavorable trends and identify significant events and uncertainties that affect the company’s liquidity, capitalresources and results of operations in the management discussion and analysis (MD&A).

A is incorrect. Notes to the financial statement provide detailed disclosures. For example, a summary of the significant accounting policies, disclosures for most asset categories and income taxes.

B is incorrect. Balance sheet reports major classes and amounts of assets, liabilities, and equity capital at a specific point in time. The income statement reports on the performance of the firm for a specific period of time.

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9. Which of the following statements best describes the level of accuracy provided by a standard audit report with respect to errors? The audited financial statements are:

A. fully assured to be free of material errors.

B. reasonable assured to be free of all errors.

C. reasonable assured to be free of material errors.

  
    Ans: C.

Audits provide reasonable assurance that the financial statements are fairly presented, meaning that there is a high degree of probability that they are free of material error, fraud or illegal acts.

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10.Making any necessary adjustments to the financial statements to facilitate comparison with respect to accounting choices is done in which step of the financial statement analysis framework?

A. Collect data.

B. Process data.

C. Analyze/interpret the processed data.

  
    Ans: B.

Making any adjustments is part of the processing data step. Commonly used data bases (part of the collection phase) do not make adjustments for differences in accounting choices.

A is incorrect. Collect data includes: 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.

C is incorrect. Analyze/interpret the processed data includes: Use the data to answer the questions stated in the first step. Decide what conclusions or recommendations the information supports.