Why Does the Auditor Divide the Financial Statements into Segments

question 71

Multiple Choice

Why does the auditor divide the financial statements into segments around the financial statement cycles?

• A) Most auditors are trained to audit cycles as opposed to entire financial statements.
• B) The approach aids in the assignment of tasks to different members of the audit team.
• C) The cycle approach is required by auditing standards.
• D) The cycle approach allows the auditor to detect indirect-effect illegal acts.

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Definitions:

Differential Cost Analysis

The process of comparing the cost differences between two business decisions in order to determine which is more financially viable.

Traceable

Refers to costs or expenses directly associated with a specific department, product, or project, making it easy to assign them accurately.

Activity-based Costing

A costing methodology that assigns overhead and indirect costs to specific products or activities based on their consumption.

Avoidable Cost

A cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with differential cost and relevant cost.