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:

Ineffective Marketing Plan

A strategy for promoting and selling products or services that fails to achieve its intended sales or market share goals.

Product Liability

The legal responsibility of manufacturers and sellers for defects in the products they offer that cause harm to consumers.

Manufacturing Defect

A flaw in the production of a product that causes it to deviate from its intended design or specifications.

Design Defect

A flaw in the intentional design of a product that results in it being unsafe for its intended or reasonably foreseeable use.