DATA ANALYTICS FOR ACCOUNTING W/CONNECT
1st Edition
ISBN: 9781260574449
Author: RICHARDSON
Publisher: MCG
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Textbook Question
Chapter 8, Problem 3DQ
Why do audit firms perform analytical procedures to identify risk? Which type of ratios (liquidity, solvency, activity, and profitability ratios) would you use to evaluate the company’s ability to continue as a going concern?
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Which of the following is the least independent piece of information to collect about a company that is a potential M&A target?
A. Internal audits
B. Fun and Bradstreet reports
C. Audited financial statements
D. Relevant macroeconomics outlooks from an independent research organization
What is the purpose of an audit?
A) To provide investment advice to shareholders
B) To ensure that financial statements are accurate and comply with accounting standards
C) To manage and control a company's financial resources
D) To predict a company's future financial performance
Which of the following is the best description of reliability in relation to information in financial statements?
Comprehensibility to users
Influence on the economic decisions
Freedom from material error and bias
Inclusion of degree of caution of users
Chapter 8 Solutions
DATA ANALYTICS FOR ACCOUNTING W/CONNECT
Ch. 8 - Prob. 1MCQCh. 8 - XBRL stands for: a. Extensible Business Reporting...Ch. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - What type of ratios measure a firms operating...Ch. 8 - What type of ratios measure a firms ability to pay...Ch. 8 - Prob. 10MCQ
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Why do audit firms perform analytical procedures...Ch. 8 - Go to https://xbrl.us/data-rule/dqc_0015-lepr/ and...Ch. 8 - Go to https://xbrl.us/data-rule/dqc_0015-lepr/ and...Ch. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 1PCh. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Go to Loughran and McDonalds sentiment word lists...Ch. 8 - Prob. 6P
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- What is the basic purpose for examining trends in a company’s financial ratios and other data? What other kinds of comparisons might an analyst make?arrow_forwardEvaluate the benefits and the limits of financial ratio analysis. What other type(s) of analysis should accompany financial ratio analysis in order to assess more accurately the performance and the strategy of a company?arrow_forwardTo what extent is the auditors' opinion an indicator of a company's future financial success and future cash dividends to stockholders?arrow_forward
- Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: O a. They show the relative proportion of debt items with respect to shareholders' equity or total capital. b. They show the profitability of the company over a specific period of time. c. They show the probability of whether the company will face problems in operations. O d. They show the relative levels of liquid assets of the company.arrow_forwardIn the realm of financial accounting, how do accounting policies, changes in accounting estimates, and errors influence the accuracy and reliability of a company's financial statements? Illustrate each concept with a practical scenario and detail the necessary adjustments or disclosures that might be required to ensure transparent and accurate financial reporting.arrow_forwardRisk Management in Accounting: ABC Insurance Company is evaluating its financial risks. Discuss the identification and assessment of financial risks in the insurance industry. Propose risk mitigation strategies and explain the role of internal control systems in managing risks. How can risk management contribute to the stability of an insurance company? Objective Type Question: What is the primary purpose of risk mitigation strategies in accounting? a) To eliminate all risks b) To transfer risks to external parties c) To reduce the impact or likelihood of risks d) To ignore potential risksarrow_forward
- What are some important ratios to analyze in financial statements? Which measures are important and Why? And once i do calculate the numbers how can i interpret the results and make a good management decision?arrow_forwardWhich of the following is least likely to be considered a financial statement audit risk factor? Management operating and financing decisions are dominated by top management, A new client with no prior audit history, Rate of change in the entity's industry is rapid, Profitability of the entity relative to its industry is inconsistentarrow_forwardWhy is an entity permitted to change an accounting policy? A. The change would allow the entity to present a more favorable profit picture.B. The change would result in the financial statements providing more reliable and relevant information about financial position, financial performance and cash flowsC. The change is made by the internal auditorD. The change is made by the CPAarrow_forward
- match the correct description with the correct term. Descriptions Terms The level and nature of risk attributable to a firm’s activities and operations, and ignoring the risks associated with the firm’s capital structure. Asymmetric information The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm’s past, current, and future conditions and prospects, compared to the firm’s managers. Business risk The extent to which a firm’s cost structure contains a large proportion of fixed costs, which raises its level of business risk if the firm’s sales decline. Capital structure This practice of employing a large proportion of fixed-cost sources of financing, such as debt securities and preferred stock, exposes a firm’s stockholders to more business risk. EPS indifference point The ability of a firm to borrow money at a reasonable cost when good investment opportunities arise…arrow_forwardWhat are the limitations to using financial ratio analysis [such as profitability ratios, liquidity ratios, gearing ratios, and investment ratios] computed from the financial statements of a company. What other alternatives could have been used to decide on the performance and investment-worthiness of a company.arrow_forwardYou want to evaluate the stock of a company. Answer the following questions to guide your analysis analysis and explain what data you rely on and what you do with it? Why are the net assets of the company important? What other indicator does an investor look at when selecting investments?arrow_forward
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