Which of the Following Best Describes the Independent Auditor's Approach

question 10

Multiple Choice

Which of the following best describes the independent auditor's approach to obtaining satisfaction concerning depreciation expense in the income statement?

• A)Verifying the mathematical accuracy of the amounts charged to income as a result of depreciation expense.
• B)Determining the method for computing depreciation expense and ascertaining that it is in accordance with generally accepted accounting principles.
• C)Reconciling the amount of depreciation expense to those amounts credited to accumulated depreciation accounts.
• D)Establishing the reasonableness of useful lives and depreciation methods for depreciable assets and recomputing the depreciation expense.

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Definitions:

Indirect Method

A way of presenting a cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Direct Method

A method of preparing the cash flow statement where actual cash receipts and cash payments are reported, showing the specific sources and uses of cash.

Operating Activities

These are the primary revenue-producing activities of a business, such as selling goods and services, which are reported in the statement of cash flows.

Production and Delivery

The process and logistics involved in creating products and getting them to the customer.