When Using the Cycle Approach to Segmenting an Audit, the Reason

question 78

Multiple Choice

When using the cycle approach to segmenting an audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

• A) the transactions are related to financing a company rather than to its operations.
• B) most capital acquisition and repayment cycle accounts involve few transactions, but each is often highly material, and therefore should be audited extensively.
• C) both A and B
• D) neither A nor B

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed, varying by income or profits level and jurisdiction.

Deductions

Amounts that are subtracted from an individual's gross income to reduce the income subject to tax, including various expenses, contributions, and allowances.

Employee Payroll

The total amount due to employees for the work they’ve done, including wages, salaries, and bonuses.

Interest Expense

The cost incurred by an entity for borrowed funds, reflecting the interest payments on debt.