Which of the Following Situations Has the Best Chance of Being

question 30

Multiple Choice

Which of the following situations has the best chance of being detected when a CPA compares revenues and expenses reported for the year being audited (current year) with the prior year and investigates all changes exceeding a fixed percentage?

• A) An increase in property tax rates has not been recognized in the company's current year accrual.
• B) The cashier began lapping accounts receivable in the current year.
• C) Because of worsening economic conditions, the current year provision for uncollectible accounts was inadequate.
• D) The company changed its capitalization policy for small tools in the current year.

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Definitions:

Outstanding Voting Rights

The rights to vote that are held by shareholders of a company, which have not been exercised yet.

Self-Regulating Organizations

Entities that operate independently to enforce rules and standards within a particular industry or profession without direct government oversight.

Securities Regulation

The set of laws and regulations governing how securities are issued, bought, sold, and traded, primarily aimed at protecting investors.

Securitization

The financial practice of pooling various types of contractual debt such as mortgages and selling their related cash flows to third-party investors as securities.