The purpose of an audit is to: a. determine whether or not a company has a good
ID: 2488390 • Letter: T
Question
The purpose of an audit is to: a. determine whether or not a company has a good credit risk. b. render an opinion on the fairness of the statements. c. determine whether or not a company complies with income tax regulations. d. determine whether or not a company is a good investment. Profitability refers to the ability of the business to: a. manage its accounts receivable and inventory. b. earn a reasonable amount of income. c. provide owners with dividends. d. pay its current and noncurrent liabilities. Which of the following is an analysis used in assessing solvency? a. Fixed assets turnover b. P/E ratio c. Accounts receivable analysis d. Earning per share For most profitable companies, the rate earned on total assets will be less than: a. the rate earned on stockholders’ equity. b. the rate earned on total liabilities and stockholders' equity. c. the rate earned on sales. d. cannot be determined without more information. Which one of the following is not a characteristic generally evaluated in ratio analysis? a. Liquidity b. Marketability c. Solvency d. ProfitabilityExplanation / Answer
The purpose of audit is to render an opinion on the fairness of the statements.
b. option is correct.
The work of an auditor is to express his opinion on the trus and fair view of the financial statements of the business being audited.
Profitability refers to the ability of the business to earn a reasonable amount of income.
The ability of the business to generate a revenue higher than its cost is called profitability. Excess of revenue over cost is net income for the business which is termed as profitability.
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