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:

Trade Receivables

Sums due to a business from its customers for goods or services provided on credit.

Notes Receivable

Represents amounts owed to a company that are evidenced by formal agreements or promissory notes.

Interest Revenue

Interest revenue is the income earned from lending funds or depositing funds in interest-bearing accounts.

Journalize Transactions

The process of recording financial transactions in a company's journal, marking the first step in the accounting cycle.