The Most Effective and Efficient Audit Approach in the Examination

question 112

Multiple Choice

The most effective and efficient audit approach in the examination of the income statement would be which of the following?

• A) Examine income statement accounts concurrently with the related balance sheet accounts.
• B) Compare company's components of net income to other businesses in the same industry.
• C) Compare company's components of net income to the previous two years.
• D) Examine changes in all balance sheet accounts.

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Definitions:

Interest Revenue

Income earned from lending money or depositing funds in interest-bearing accounts.

Present Value Factors

Numerical factors used to calculate the present value of a future amount by considering the time value of money and interest rates.

Operating Lease

A contract that allows for the use of an asset but does not convey rights similar to ownership, typically shorter term and cancellable.