In Order to Efficiently Establish the Correctness of the Accounts

question 36

Multiple Choice

In order to efficiently establish the correctness of the accounts payable cutoff, an auditor will be most likely to:

• A)coordinate cutoff tests with physical inventory observation.
• B)compare cutoff reports with purchase orders.
• C)compare vendors' invoices with vendors' statements.
• D)coordinate mailing of confirmations with cutoff tests.

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Definitions:

Capital Account

A financial statement account that shows the equity ownership of shareholders or owners in a company.

Owners' Equity

The residual interest in the assets of an entity after deducting liabilities, representing the ownership's value in the company.

Capital Balances

The amount of capital that remains in a business after deductions, representing the residual interest in the firm's assets after liabilities have been deducted.

Net Income

The profit remaining after all expenses, taxes, and costs have been subtracted from total revenue.