Correct Answer: D

Explanation:

Choice "d" is correct. In a report qualified for inadequate disclosure, the auditor would add an explanatory

paragraph and modify the opinion paragraph, but the introductory and scope paragraphs would not be

modified.

Choices "a", "b", and "c" are incorrect, as per the above explanation.

Correct Answer: B

Explanation:

Choice "b" is correct. Attest engagements may result in reports related to compliance with laws and

regulations.

Choices "a", "c", and "d" are incorrect. Attestation engagements specifically exclude consulting services,

advocacy services, and return preparation.

Correct Answer: C

Explanation:

Choice "c" is correct. The average number of days to collect accounts receivable is calculated by dividing

365 days by the accounts receivable turnover. Accounts receivable turnover is net credit sales divided by

the average accounts receivable:

Choice "a" is incorrect. The denominator should be net credit sales ($7,200) divided by average

receivables $1,000), or 7.2, not 12.

Choice "b" is incorrect. The average receivable balance is $1,000, not $800. The right-hand column shows

the increase over 20X1, so the 20X1 receivable balance was $1,200 − $400, or $800. Since the 20X2

receivable balance was given as $1,200, the average receivable balance is $1,000.

Choice "d" is incorrect. Average inventory ($1,000), not ending inventory ($1,200), should be used.

Correct Answer: D

Explanation: Choice "d" is correct. When using microcomputers in an auditing task, audit documentation may not contain readily observable details of calculations (e.g., present value calculations). In order to review assistants' work, a supervisor may have to examine the formulas used on the microcomputer rather than simply examining the audit documentation. Choice "a" is incorrect. The standards of fieldwork, specifically planning and supervision, would not change with the use of microcomputers on the audit. Choice "b" is incorrect. Consulting service personnel should not be necessary to document the supervisory review. Choice "c" is incorrect. The familiarity of supervisory personnel with the capabilities and limitations of microcomputers would not have an effect on the review process.

Correct Answer: A

Explanation: Choice "a" is correct. 6.8%. This question pertains to the manner in which changes in the required amount of capital will impact the weighted average cost of capital governed by the target capital structure. The rates are given, and you must derive the weights. The company needs a total of $1,000,000. The total Retained Earnings is $100,000, which will only represent 10% of the total amount needed. In J92-1.01, we computed the cost of new common share issues at 7.6%, and we know that we can issue unlimited amounts of each security. Based on these assumptions, we know that the target capital structure will remain unchanged but that the components of common equity will be priced differently because Retained Earnings only equals $100/$1,000 (or 10%). If the target capital structure calls for 50% common stock and only 10% is available from retained earnings, then 40% must come from the issuance of new common shares. The weighted average is computed as follows:

Choices "b", "c", and "d" are incorrect, per the above calculation.