Auditors Generally Use a Financial Statement Cycle Approach When Performing

question 7

Essay

Auditors generally use a financial statement cycle approach when performing a financial statement audit. Describe the transaction flow, using specific examples, from journals to financial statements that produce financial statements.

---

Definitions:

Financial Statements

Financial reports that summarize the effects of events on a business.

Horizontal Analysis

Financial analysis that compares an item in a current statement with the same item in prior statements in terms of the amount and percentage of change.

Base Year

A specific year chosen as a point of comparison for financial or economic data over time.

Current Position Analysis

The evaluation of a company’s ability to pay its current liabilities.