Which of the Following Transactions Is an Auditor Most Likely

question 14

Multiple Choice

Which of the following transactions is an auditor most likely to examine when auditing the retained earnings account?

• A)Changing from one method of depreciation to another.
• B)Adjusting the percentage used to estimate the allowance for doubtful accounts.
• C)Changing from the FIFO to LIFO method of inventory valuation.
• D)Correcting an error in depreciation in a prior year.

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Definitions:

Standard Practices

Established and widely accepted methods or procedures used in a field or industry.

Finance Charge

The cost associated with obtaining credit, including interest, fees, and other charges.

Financing Charge

An interest or fee paid for the use of borrowed money.

Uncollectible Accounts

Accounts receivable that are recognized as unlikely to be collected, leading to their write-off as bad debts.