Question

An auditor is reporting on cash basis financial statements. These statements are best referred to in his or her report by which one of the following descriptions?

a. Financial position and results of operations arising from cash transactions.
b. Assets and liabilities arising from cash transactions and revenue collected and expenses paid.
c. Balance sheet and income statement resulting from cash transactions.
d. Cash balance sheet and the source and application of funds.

Answer 1

The best description for cash basis financial statements in an auditor's report is assets and liabilities arising from cash transactions and revenue collected and expenses paid.

Step-by-step explanation:

The best description for cash basis financial statements in an auditor's report is option B: Assets and liabilities arising from cash transactions and revenue collected and expenses paid.

Cash basis financial statements are prepared based on actual cash inflows and outflows, and they only include transactions involving cash. These statements show the cash position of a company and the cash flows resulting from its operations. Therefore, the most accurate description would be assets and liabilities arising from cash transactions, as well as revenue collected and expenses paid.