During the Course of an Audit, a CPA's Substantive Analytical

question 17

Multiple Choice

During the course of an audit, a CPA's substantive analytical procedure provides an expected interest expense that is significantly higher than the amount recorded in the entity's accounting records. This observation would most likely lead the auditor to suspect that:

• A)the entity failed to record all debt.
• B)discount on Bonds is misstated.
• C)interest income is overstated.
• D)the entity failed to record all interest expense.

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Definitions:

Gross Income

The total income from all sources before any deductions or taxes are taken out.

Accounts Receivable

Money owed to a business by its clients or customers for goods or services delivered but not yet paid for.

Inventory

Inventory encompasses the goods and materials a business holds for the purpose of resale or production.

Management

The process of dealing with or controlling things or people, often within the context of business operations like organizing, planning, and overseeing.