Assume you have inherited a sum of money from a

Assume you have inherited a sum of money from a distant relative and are looking for good investment opportunities. You are considering investing in one of two companies, Wonderworks or Hoffstetter€™s. Both companies are retailing organizations that have earned profits during the month of January as follows:

Assume you have inherited a sum of money from a

You learn that a CPA examined the financial information provided by Wonderworks and confirmed the information was prepared according to GAAP. €œI don€™t see any reason to pay a CPA to examine my company€™s books,€ Patty Hoffstetter tells you. They add to the cost of conducting business. Hoffstetter€™s brother-in-law prepared the company€™s financial information. He has no formal training in accounting but followed the instructions provided in the accounting software package that he purchased from an office supply company.

A. Do you agree that the audit adds no value? Why or why not?
B. GAAP help ensure that users can compare the financial information of two different companies. The two sets of financial information appear identical in format. Are theycomparable?

Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...


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