CFA level 1 Financial reporting and
analysis: Review Questions and Answers
Graded A+
The role of financial statement analysis is best described as?
Using financial reports prepared by analysts to make economic decisions
Evaluating a company for the purpose of making economic decisions - Correct
answer-evaluating a company for the purpose of making economic decisions
What type of audit opinion is preferred when analyzing financial statements?
Qualified
Adverse
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,Unqualified - Correct answer-An unqualified opinion is a clean opinion and
indicates that the financial statements present the company's performance and
financial position fairly in accordance with a specified set of accounting standards
An independent audit report is most likely to provide?
Reasonable assurance that the financial statements are fairly presented
A qualified opinion with respect to the transparency of the financial statements -
Correct answer-It provides reasonable assurance that the financial statements are
fairly presented, meaning that there is a high probability that the audited statements
are free from material error, fraud or illegal acts that have direct effect on the
financial statements
Interim financial reports released by a company are most likely to be:
Monthly
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, Unaudited
Unqualified - Correct answer-Interim reports are typically provided semiannually
or quarterly and present the four basic financial statements and condensed notes.
They are not audited. Unqualified is a type of audit opinion.
TRR Enterprises sold products to customers on 30 June 2006 for a total price of
€10,000. The terms of the sale are that payment is due in 30 days. The cost of the
products was €8,000. The most likely net change in TRR's total assets on 30 June
2006 related to this transaction is:
€0.
€2,000.
€10,000. - Correct answer-The sale of products without receipt of cash results in an
increase in accounts receivable (an asset) of 10,000. The balance in inventory (an
asset) decreases by 8,000. The net increase in assets is 2,000. This would be
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analysis: Review Questions and Answers
Graded A+
The role of financial statement analysis is best described as?
Using financial reports prepared by analysts to make economic decisions
Evaluating a company for the purpose of making economic decisions - Correct
answer-evaluating a company for the purpose of making economic decisions
What type of audit opinion is preferred when analyzing financial statements?
Qualified
Adverse
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,Unqualified - Correct answer-An unqualified opinion is a clean opinion and
indicates that the financial statements present the company's performance and
financial position fairly in accordance with a specified set of accounting standards
An independent audit report is most likely to provide?
Reasonable assurance that the financial statements are fairly presented
A qualified opinion with respect to the transparency of the financial statements -
Correct answer-It provides reasonable assurance that the financial statements are
fairly presented, meaning that there is a high probability that the audited statements
are free from material error, fraud or illegal acts that have direct effect on the
financial statements
Interim financial reports released by a company are most likely to be:
Monthly
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, Unaudited
Unqualified - Correct answer-Interim reports are typically provided semiannually
or quarterly and present the four basic financial statements and condensed notes.
They are not audited. Unqualified is a type of audit opinion.
TRR Enterprises sold products to customers on 30 June 2006 for a total price of
€10,000. The terms of the sale are that payment is due in 30 days. The cost of the
products was €8,000. The most likely net change in TRR's total assets on 30 June
2006 related to this transaction is:
€0.
€2,000.
€10,000. - Correct answer-The sale of products without receipt of cash results in an
increase in accounts receivable (an asset) of 10,000. The balance in inventory (an
asset) decreases by 8,000. The net increase in assets is 2,000. This would be
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