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:

Fixed Assets

Long-term tangible assets held for business use and not expected to be converted to cash in the current or upcoming fiscal year, such as buildings, machinery, and land.

Capital Expenditures Budget

A financial plan dedicated to the projected spending on long-term assets that will deliver value in the future.

Sales Budget

An estimation of the revenue expected from sales activities over a certain period, used for financial planning and strategy.

Capital Expenditures Budget

A plan for the funds a company intends to spend on major physical assets, aimed at future benefits or investments.