A client owning 18% of the voting stock of an investee has accounted for the investment under the equity method. The effect of using the equity method rather than the fair value method is material. In this instance,
a. The financial statements are not fairly presented
b. A decision as to whether an 18% interest provides an ability to exercise significant influence rests with management, and the auditor should consider the equity method to be the appropriate valuation method
c. Because an interest of less than 20% implies that the investor cannot exercise significant influence over the investee, the auditor will need to obtain evidence to support a claim to the contrary
d. If the equity method is used in the published financial statements, and the auditor agrees that this method is appropriate, no disclosure that the 20% presumption was set aside is required
Ans: c. Because an interest of less than 20% implies that the investor cannot exercise significant influence over the investee, the auditor will need to obtain evidence to support a claim to the contrary
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The 1934 Securities Exchange Act regulates the conduct of brokerage companies, but not publicly traded companies
Indicate whether the statement is true or false
Use this information pertaining to Tucson Company to answer the following question. 1. The corporation's Supplies account showed a beginning debit balance of $400 and supplies purchased of $1,600. There were $600 of supplies on hand at year end. 2.Depreciation on a building is estimated to be $10,000. 3.A one-year insurance policy was purchased for $4,000. Six months have passed since the
purchase. 4.Accrued interest on a note receivable amounted to $200. 5.The company received a $3,600 advance payment during the year on services to be performed. By the end of the year, one-third of the services had been performed. The adjusting entry to record the amount of service revenue earned during the accounting period is A) Service Revenue 2,400Unearned Revenue 2,400 B) Unearned Revenue 1,200Service Revenue 1,200 C) Service Revenue 1,200Unearned Revenue 1,200 D) Unearned Revenue 2,400Service Revenue 2,400