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:

Simple Interest Rate

A method of calculating interest where the interest charge is based on the original principal only.

Payments

Transfers of money in exchange for goods or services or as fulfillment of obligations under a contract.

Agreement

A mutual arrangement, typically in writing, between two or more parties detailing the terms and conditions of a deal or partnership.

Conditional Sale Contract

An agreement to sell an asset where the full payment is due after certain conditions have been met.