Why Is It That Horizontal Analysis Is Performed Only on the Income

question 16

Multiple Choice

Why is it that horizontal analysis is performed only on the income statement and balance sheet,but not on the statement of cash flows?

• A)When searching for fraud, examining the statement of cash flows is not as effective as comparing actual changes in account balances.
• B)Horizontal analysis converts balance sheet and income statement to change statements whereas the statement of cash flow is already a change statement.
• C)The statement cash flow of cash flows does not provide any valuable fraud-related information.
• D)Horizontal analysis of balance sheets and income statements is relatively easy, while applying the same procedure to the statement cash flows is complicated.

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Definitions:

Cognitive Algebra

An approach in psychology that considers how individuals mentally combine various factors to form judgments or decisions.

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Method of forming positive or negative impressions by first weighting and then averaging the valence of all the constituent person attributes.

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The process of performing arithmetic operations without the use of external devices or tools, relying solely on the mind.

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Cognitive structures that help individuals organize and interpret information about events or situations, guiding expectations and behaviors in similar contexts.