The auditor generally gives most emphasis to ratio and trend analysis in the examination of:
A)retained profits.
B)income statement items.
C)statement of financial position items.
D)cash flows.

Question

Quizplus · Accepted Answer

Ratio and trend analysis are used to evaluate the relationships between items in the income statement, such as revenue and expenses, gross profit margin, operating profit margin, and net profit margin. This analysis helps the auditor identify any unusual fluctuations or trends that may indicate financial statement fraud, errors, or irregularities. While the auditor may also use ratio and trend analysis for other financial statement items, the income statement generally receives more emphasis because it provides a key measure of a company's operating performance and profitability.

The Auditor Generally Gives Most Emphasis to Ratio and Trend