Which of these characteristics may apply to both the quality of relevance and reliability?
| Timeliness |
| Feedback: Timeliness is incorrect because it is a subcategory Relevance only. Timeliness is having the information available while it is able to influence decisions. | | Materiality |
| Feedback: Materiality is incorrect because it is a separate principle on its own. It is a pervasive contraint that dictates that the information must be material with respect to the financial statements so that the lack of the information could make a difference in decisions made by the users. | | Comparability |
| Feedback: Comparability is the correct answer. Comparability is the quality of information that enables users to identify similarities and differences between two sets of economic phenomena. It allows users to compare the information with similar information with other business enterprises and can be applied to both the quality of Relevance and Reliability. | | Verifiability |
| Feedback: Verifiability is incorrect because it is a subcategory of Reliability only. If the information is verifiable (i.e., objective), it means that the same results could be duplicated with the same measurement techniques (which is the primary concern for auditors of financial statements). |
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In assessing whether the going concern assumption is still applicable to an entity, management should take into account the following except
| C. history of profitable operations and ready access to financial resources | | Feedback: Answer C is not correct simply because if the company has a history of profitable operations and ready access to financial resources, any deviation from such norms should be a concern to management and should be considered in determining the going concern assumption. | | B. future business projections, which is at least, but is not limited to, twelve months from the end of the reporting period | | Feedback: Answer B is not correct. In determining its going concern assumption, management should consider future business projections for at least 12 months from the end of the reporting period. Such business projection can be translated to a financial plan where continuity of the business can be decided on by management. | | D. debt repayment schedules and potential sources of replacement financing | | Feedback: Answer D is not correct because availability of debt repayment schedules and potential sources of refinancing is an important aspect of business continuity especially if the company is debt-laden. Constraints in availability of funds for future growth or expansion or for repayment of debts should be considered by management in determining its going concern assumption. | | A. expected output of operations from a newly installed machinery | | Feedback: Answer A is correct. In determining its going concern assumption,managem...