Which of the following analytical procedures should be applied to the income statement?
A)Ascertain that the net income amount in the statement of cash flow agrees with the net income amount in the income statement.
B)Select sales and expense items and trace amounts to related supporting documents.
C)Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.
D)Obtain from the proper client representatives the beginning and ending inventory amounts that were used to determine costs of sales.

Question

Quizplus · Accepted Answer

Comparing actual revenues and expenses with the corresponding figures of the previous year and investigating significant differences is a common analytical procedure applied to the income statement. This helps to identify any potential issues or changes in the company's performance that should be investigated further.

Option A is incorrect because it pertains to comparing the income statement with the statement of cash flow, which is a separate financial statement.

Option B is incorrect because it pertains to verifying the accuracy of individual transactions, rather than analyzing the overall performance of the income statement.

Option D is incorrect because it pertains to obtaining information about inventory, which is not directly related to the income statement.

Which of the Following Analytical Procedures Should Be Applied to the Income