The Main Focus Taken by the Auditor in Verifying Liability

question 19

Multiple Choice

The main focus taken by the auditor in verifying liability balances is on the discovery of:

• A) understated liabilities.
• B) overstated liabilities.
• C) unrecorded liabilities.
• D) overstated or extraneous liabilities.

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities, and equities) in a balance sheet is represented as a proportion of the total account.

Base Amount

A reference value or starting point used for financial calculations, such as determining percentages or comparisons.

General-purpose Financial Statements

These are standardized financial reports prepared by organizations to provide key financial data to stakeholders such as income statements, balance sheets, and cash flow statements.

Income Statement

An income statement is a financial report that shows a company's revenues, expenses, and profits over a specific period.