An Analytical Procedure Related to the Substantive Testing of Cash

question 64

Multiple Choice

An analytical procedure related to the substantive testing of cash balances would be to _______.

• A)calculate cash as a percent of total assets and compare with auditor expectations
• B)calculate cash as a percent of total assets and compare with internal auditor expectations
• C)send notes payable confirmations to creditors
• D)send confirmations to the client firm's stockholders

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Definitions:

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a particular point in time, providing a snapshot of its financial condition.

Statement of Stockholders' Equity

A financial document that details the changes in equity of a company over a specified period, including items like issued shares, dividends, and earnings.

Liabilities

Liabilities are the amounts of money that a business is required to pay to other parties in the future, representing the company’s debts.

Stockholders' Equity

Represents the residual interest in the assets of a corporation after deducting its liabilities; essentially the net worth attributed to shareholders.