1) It is generally perceived that utilities that have cash flow problem will not be
increasing their dividend.
2) A service firm will usually have a low amount of inventory, consisting primarily of
supplies.
3) Interim reports are usually audited.
4) Generally accepted accounting principles for insurance companies developed much
sooner than statutory accounting practices.
5) Domestic accounting standards have developed to meet the needs of international
environments.
6) Equity earnings (losses) are the proportionate share of the earnings (losses) of the
investee.
7) The straight-line depreciation method recognizes depreciation in equal amounts over
each year of the life of the asset. Therefore, the straight-line depreciation method is a
conservative depreciation method.
8) Common-size analysis involves expressing comparisons in percentages.
9) The going concern assumption does not influence the classification of assets and
liabilities.
10) Analytical review procedures may be performed at various times within the audit.
11) The ideal way to compare income statement figures, such as sales, to balance sheet
figures, such as receivables, is to use a measure of the average for the balance sheet
figures.
12) The tax expense for the financial statements often agrees with the taxes payable.
13) There are many alternative titles for the statement of stockholders’ equity. The most
frequently used alternative title is the statement of shareholders’ equity.
14) Absolute figures usually have more meaning than ratio comparisons.
15) The interest rate that is assumed to be earned on pension funds can have a material
influence on the pension expense and the pension liability. The higher the rate of
interest assumed to be earned on pension funds, the higher the pension expense and the
higher the pension liability.
16) Days’ sales in receivables may be abnormally high if a material amount of sales are
on a cash basis.