This Question Tests Your Ability to Perceive the Place(s)where Potential

question 18

Essay

This question tests your ability to perceive the place(s)where potential problems may exist and the type of problem (overstatement or understatement)that may exist.
Required: For each of the items below,identify the account(s)that need(s)to be audited carefully and the reason;for example,"potential overstatement or understatement of _______."
A)Current year accounts receivable is larger than last year but the allowance for doubtful accounts is the same.
B)Current year inventory is larger than last year but the current year gross margin (profit)is larger.
C)Current year long-term liabilities are larger than last year but the interest expense is the same.
D)Current-year fixed assets total is larger than last year but current amortization expense is the same as last year.

• A)Current year accounts receivable is larger than last year but the allowance for doubtful accounts is the same.
• B)Current year inventory is larger than last year but the current year gross margin (profit)is larger.
• C)Current year long-term liabilities are larger than last year but the interest expense is the same.
• D)Current-year fixed assets total is larger than last year but current amortization expense is the same as last year.

---

Definitions:

Hypothesis

A proposed explanation for a phenomenon, typically tested through experimentation or observation to determine its validity.

Google Search Strategies

Techniques or methods used to enhance the efficiency and effectiveness of finding information using the Google search engine.

Boolean Operator NOT

A logical operator used in search engines, databases, and programming that excludes records or values meeting the specified criteria.

Boolean Operator AND

A logical operator used in search engines and databases to combine search terms, ensuring that retrieved records must contain all the specified terms.