Answered: loans made by top management were…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The operations of Dugas Bank are being evaluated by the Bangko Sentral ng Pilipinas. During the investigation, the BSP has determined that numerous loans made by top management were unwise and have seriously endangered the future of the bank. Which of the following statements is true? *

The accounting entity assumption is sacrificed. The consent of the separate entity which is the bank was violated by top management.

Basing on this information, if these decisions highly affect the ability of the bank to operate, financial accountants would need to determine whether the going concern assumption would still be used in the preparation of the financial statements.

The Bangko Sentral ng Pilipinas undertook an external audit of the bank.

The principle of periodicity assumption was violated. Past and current actions by the top management affect the future of the bank.

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