Which of the Following Should Be the First Step in Reviewing

question 268

Multiple Choice

Which of the following should be the first step in reviewing the financial statements of a nonissuer?

• A) Comparing the financial statements with statements for comparable prior periods and with anticipated results.
• B) Completing a series of inquiries concerning the entity's procedures for recording, classifying, and summarizing transactions.
• C) Obtaining a general understanding of the entity's organization, its operating characteristics, and its products or services.
• D) Applying analytical procedures designed to identify relationships and individual items that appear to be unusual.

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Definitions:

Operations

The day-to-day activities required for continued business functioning, focusing on manufacturing, providing services, or other core business processes.

Social Security Taxes

Taxes collected by the government to fund the Social Security program, which provides retirement, disability, and survivorship benefits.

Medicare Taxes

Taxes deducted from employee paychecks and also matched by employers to fund the Medicare program, a federal health insurance program for individuals who are 65 and older and for some younger people with disabilities.

Accrued Salaries

Salaries that have been earned but not yet paid to employees by the end of an accounting period.