Of the following, which is an important procedure that an auditor should use when making an overall review of the income statement?
A)Obtain a schedule of the retained earnings activity for the period.
B)Compare actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.
C)Obtain, from the proper entity representative, inventory certificates for the beginning and ending inventory amounts that were used to determine cost of sales.
D)Ascertain that the net income amount in the statement of cash flows agrees with the net income amount in the income statement.

Question

Quizplus · Accepted Answer

Comparing actual revenues and expenses with the corresponding figures of the previous year and investigating significant differences is an important procedure that an auditor should use when making an overall review of the income statement. This helps to identify any unusual or unexpected items that may require further investigation. Obtaining a schedule of the retained earnings activity for the period, obtaining inventory certificates, or ascertaining the net income amount in the statement of cash flows are important procedures, but they are not directly related to reviewing the income statement as a whole.

Of the Following, Which Is an Important Procedure That an Auditor