Which of the Following Is an Example of How an Analytical

question 42

Multiple Choice

Which of the following is an example of how an analytical procedure may be helpful in identifying accounts and assertions that are likely to contain misstatements?

• A) An improvement in the current ratio combined with an increase in the quick ratio.
• B) An increase in gross sales combined with an increase in earnings per share.
• C) Susceptibility of misappropriation.
• D) An increase in gross margins combined with an increase in the number of inventory turn days.
• E) Difficult-to-audit accounts or transactions.

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Definitions:

Operating Departments

Divisions or units within an organization directly involved in its core business activities, responsible for producing the goods or services it offers.

Income Statements

Reports that detail the revenue, expenses, and profitability of a company over a defined accounting period, showing its financial performance.

Service Departments

Units within an organization that provide support services to other departments, rather than producing goods or services for external customers.

Generate Revenues

The process of earning income from business activities, such as sales of goods and services.