Assume That Application of Analytical Procedures Revealed Significant Unexplained Differences

question 3

Multiple Choice

Assume that application of analytical procedures revealed significant unexplained differences between recorded amounts and the expectations (estimates) developed by the auditor. If management is unable to provide an acceptable explanation, the auditor should:

• A)consider the matter a scope limitation.
• B)perform additional audit procedures to investigate the matter further.
• C)intensify the audit with the expectation of detecting management fraud.
• D)withdraw from the engagement.

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Definitions:

Straight-Line Method

A method of depreciation where an asset's cost is evenly allocated over its useful life.

Discount on Bonds Payable

The gap between what a bond is actually worth and the price at which it is sold, in cases where it sells for less than its stated value.

Bonds Payable

This term refers to the amount of money a company owes to bondholders at the end of an accounting period, representing a long-term liability.

Present Value

The present valuation of money to be received in the future or recurrent cash inflows, accounting for a chosen rate of interest.