Which of the Following Circumstances Most Likely Would Cause an Auditor

question 887

Multiple Choice

Which of the following circumstances most likely would cause an auditor to suspect that material misstatements exist in a client's financial statements?

• A) The assumptions used in developing the prior year's accounting estimates have changed.
• B) Differences between reconciliations of control accounts and subsidiary records are not investigated.
• C) Negative confirmation requests yield fewer responses than in the prior year's audit.
• D) Management consults with another CPA firm about complex accounting matters.

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Definitions:

Return on Investment (ROI)

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of several different investments, calculated as net profit divided by the cost of the investment.

Asset Data

Refers to the collection of information related to a company's assets, including physical assets and financial assets.

Allocation Bases

Criteria or bases used to distribute costs among different departments, products, or activities in a fair and efficient manner.

Salaries

Regular payments made by an employer to an employee, usually on a monthly or biweekly basis, in exchange for work performed.