An Entity's Income Statements Were Misstated Due to the Recording

question 23

Multiple Choice

An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts.Auditors most likely could have detected this irregularity by

• A)Tracing a sample of journal entries to the general ledger.
• B)Evaluating the effectiveness of the internal control policies and procedures.
• C)Investigating the reconciliations between controlling accounts and subsidiary records.
• D)Performing analytical procedures designed to disclose differences from expectations.

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Definitions:

Linguistic Relativity

Linguistic relativity is the hypothesis that the structure of a language affects its speakers' world view or cognition, suggesting that language and thought are interdependent.

Nativist

A theory or perspective that emphasizes the role of innate factors over experience or learning in the acquisition of abilities and characteristics.

Social Communication

The exchange of information and expression of thoughts, feelings, and ideas through verbal and non-verbal means within a social context.

Loss Aversion

A principle in behavioral economics suggesting that individuals are more sensitive to losses than to equivalent gains, leading to risk-averse decision-making.