An Auditor's Analytical Procedures Indicate a Lower Than Expected Return

question 57

Multiple Choice

An auditor's analytical procedures indicate a lower than expected return on an equity method investment. This situation most likely could have been caused by:

• A)an error in recording amortization of the excess of the investor's cost over the investment's underlying book value.
• B)the investee's decision to reduce cash dividends declared per share of its common stock.
• C)an error in recording the unrealized gain from an increase in the fair value of available-for-sale securities in the income account for trading securities.
• D)a substantial fluctuation in the price of the investee's common stock on a national stock exchange.

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Definitions:

Ambidextrous Organization

An organization capable of efficiently managing and exploiting existing competencies while simultaneously exploring and innovating new opportunities.

Organic

In organizations, refers to structures or processes that are flexible, adaptable, and decentralized; in agriculture, pertains to farming practices that avoid synthetic chemicals.

Modular Organization

A flexible organizational structure where components or modules can be easily assembled, reassembled, added, or removed to adapt to changing demands.

Market Mechanisms

The use of market principles and forces to allocate resources and determine prices within an economy.