An entity's income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts. Auditors most likely could have detected this irregularity by
A)tracing a sample of journal entries to the general ledger.
B)evaluating the effectiveness of the internal control policies and procedures.
C)investigating the reconciliations between controlling accounts and subsidiary records.
D)performing analytical procedures designed to disclose differences from expectations.

Question

Quizplus · Accepted Answer

Performing analytical procedures designed to disclose differences from expectations would have allowed the auditors to identify any unusual or unexpected account balances or changes in account balances, which would have prompted further investigation into the recording of the journal entries involving expenses and revenues. Tracing journal entries to the general ledger, evaluating internal controls, and investigating reconciliations would not necessarily have detected this irregularity.

An Entity's Income Statements Were Misstated Due to the Recording