Which Substantive Analytical Procedure Would Help Determine If There Are

question 127

Multiple Choice

Which substantive analytical procedure would help determine if there are unrecorded or nonexistent accounts?

• A) Review the list of accounts payable for unusual items.
• B) Compare acquisition-related expense account balances with prior years.
• C) Calculate ratios, such as accounts payable divided by current liabilities.
• D) Calculate ratios, such as sales divided by gross profit.

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Definitions:

Economic Profits

Profits that exceed the opportunity costs of all resources used by a firm, including both explicit and implicit costs.

Accounting Profits

The financial gain calculated by subtracting total explicit costs from total revenue, as recorded in the financial statements.

Explicit Costs

Costs that involve direct monetary payment by a business to purchase or maintain resources.

Usury Law

Legal regulations that set maximum interest rates that can be charged on loans to protect consumers against excessively high rates.