An Auditor's Analytical Procedures Indicate a Lower Than Expected Return

question 57

Multiple Choice

An auditor's analytical procedures indicate a lower than expected return on an equity method investment. This situation most likely could have been caused by:

• A)an error in recording amortization of the excess of the investor's cost over the investment's underlying book value.
• B)the investee's decision to reduce cash dividends declared per share of its common stock.
• C)an error in recording the unrealized gain from an increase in the fair value of available-for-sale securities in the income account for trading securities.
• D)a substantial fluctuation in the price of the investee's common stock on a national stock exchange.

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Definitions:

Surface

The outermost or uppermost layer of a physical object or area of land or water.

Clay Minerals

A group of hydrous aluminium phyllosilicates, often containing iron, magnesium, or potassium, critical for soil structure and fertility.

Quartz

is a hard, crystalline mineral composed of silicon and oxygen atoms, one of the most abundant minerals in the Earth's crust.

Granite

Granite is a coarse-grained igneous rock comprised mainly of quartz, feldspar, and mica, known for its strength and widely used in construction and monuments.