Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

20Q

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 1446

Short Answer

What is the difference between a CPA’s unqualified opinion or “clean” opinion and a qualified one?

A qualified opinion may be a reflection of the auditor's failure, while an unqualified one is considered free of material misstatement.

See the step by step solution

Step by Step Solution

Meaning of CPA

A Certified Public Accountant (CPA) may be a designation given to authorized accounting specialists. The CPA permit is given by the Board of Accounts for each state.

Explaining the difference between a CPA’s unqualified opinion or “clean” opinion and a qualified one

The CPA communicates a "clean" or unqualified conclusion when the client's financial statements are presented based on an examination of the client's monetary position, and the results of the operations can be understood with largely accepted oversight measures, and the statement is widely accepted. Conforms to accounting standards and includes all information disclosures that are fundamental to creating a fraud-free explanation.

The CPA expresses a qualified conclusion when it must take exception to the introduction of one or more components of the financial statements, but the exception or exceptions are not sufficient to actually rule out or "adverse" the expression of an estimate opinion.

Most popular questions for Business-studies Textbooks

Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size are presented below.

Edna Millay

2017 Industry

2015

2016

2017

Averages

Current ratio

2.09

2.27

2.51

2.24

Quick ratio

1.15

1.12

1.19

1.22

Inventory turnover

2.40

2.18

2.02

3.50

Net sales to stockholders’ equity

2.71

2.80

2.99

2.85

Return on common stockholders’ equity

0.14

0.15

0.17

0.11

Total liabilities to stockholders’ equity

1.41

1.37

1.44

0.95

Millay is being reviewed by several entities whose interests vary, and the company’s financial ratios are a part of the data being considered. Each of the parties listed below must recommend an action based on its evaluation of Millay’s financial position.

Archibald MacLeish Bank. The bank is processing Millay’s application for a new 5-year term note. Archibald MacLeish has been Millay’s banker for several years but must reevaluate the company’s financial position for each major transaction.

Robert Penn Warren. A brokerage firm specializing in the stock of electronics firms that are sold over-the-counter, Robert Penn Warren must decide if it will include Millay in a new fund being established for sale to Robert Penn Warren’s clients.

Working Capital Management Committee. This is a committee of Millay’s management personnel chaired by the chief operating officer. The committee is charged with the responsibility of periodically reviewing the company’s working capital position, comparing actual data against budgets, and recommending changes in strategy as needed.

Instructions

a) Describe the analytical use of each of the six ratios presented above.

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.