Which of the following transactions is an auditor most likely to examine when auditing the retained earnings account?
A)Changing from one method of depreciation to another.
B)Adjusting the percentage used to estimate the allowance for doubtful accounts.
C)Changing from the FIFO to LIFO method of inventory valuation.
D)Correcting an error in depreciation in a prior year.

Question

Quizplus · Accepted Answer

Retained earnings account is affected by prior period adjustments, which include correcting errors made in previous periods such as the correction of an error in depreciation. Changing the depreciation method, estimating the allowance for doubtful accounts, or inventory valuation methods do not affect the retained earnings directly.

Which of the Following Transactions Is an Auditor Most Likely