Which of the following is a disclosure requirement for 'Concentrations' (Risks and Uncertainties)?

Answer options:

Concentration in the volume of business transacted with a particular customer.

Concentration of employees in a specific age group.

Concentration of office locations in one city.

Concentration of cash in a single bank.

How to approach this question

Disclose concentrations if: 1. Exists at date of FS. 2. Makes entity vulnerable to near-term severe impact. 3. Reasonably possible to occur.

Full Answer

A.Concentration in the volume of business transacted with a particular customer.✓ Correct

Concentrations in the volume of business transacted with a particular customer, supplier, lender, grantor, or contributor must be disclosed if the loss of that relationship could have a severe impact.

Common mistakes

Thinking all concentrations must be disclosed (only those meeting the vulnerability criteria).

Question 49 All questions

Practice the full CPA FAR Practice Exam 5

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