An Inexperienced Auditor Verified the Computation of Depreciation on a Machine

question 20

Multiple Choice

An inexperienced auditor verified the computation of depreciation on a machine, but did not actually see the machine.The auditor's actions led to a weakness in the ___ generic step of a financial statement audit.

• A)Second
• B)Third
• C)Fourth
• D)Fifth

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Definitions:

Financial Statement

A formal record of the financial activities and position of a business, person, or other entity, presenting the financial results over a specific period.

Normal Balance

The side (debit or credit) of an account on which increases to the account are recorded, depending on the account type.

Temporary/Permanent

Refers to the nature of accounts where temporary accounts are closed at the end of an accounting period, and permanent accounts carry their ending balances into the next period.

Accrued Interest Expense

The interest expense that has been incurred but not yet paid, representing the cost of borrowing money for a particular period.