The Most Effective and Efficient Audit Approach in the Examination

question 4

Multiple Choice

The most effective and efficient audit approach in the examination of the income statement would be which of the following?

• A) Examination of income statement accounts concurrently with the related balance sheet accounts.
• B) Compare company's components of net income to other businesses in the same industry.
• C) Compare company's components of net income to the previous two years.
• D) Examine changes in all balance sheet accounts.

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Definitions:

Free Recall

Free recall is a memory test in which an individual is asked to remember and reproduce information in any order without any specific cues.

Primacy Effect

The tendency to remember information that is presented first, better than information that is presented later on.

Memory Consolidation

The process by which short-term memories are transformed into long-term memories, making them more stable and durable in the brain.

Serial List

involves remembering or recognizing a sequence of items in the order they were presented.