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

question 29

Multiple Choice

An entity's income statements were misstated due to the recording of a journal entry that involved debits and credits to an unusual combination of expense and revenue accounts. The auditor most likely to detect this irregularity by ________.

• A) tracing a sample of journal entries to the general ledger
• B) evaluating the effectiveness of the internal control system policies and procedures
• C) investigating the reconciliation of control accounts with the subsidiary records
• D) performing analytical procedures designed to disclose differences between the balances in the accounts and budgeted amounts

---

Definitions:

Innovators

Individuals or organizations that first adopt new technologies or ideas, often leading the way for others to follow.

Information Sources

Various means through which data is gathered, which can include books, journals, websites, and personal interviews, used for research and decision-making.

Diffusion of Innovation

A theory that explains how, why, and at what rate new ideas and technology spread through cultures.

Innovators

Individuals who adopt new ideas or technologies before most others in a society or industry.