One way that the auditor might achieve audit efficiency is to recognize the interrelationship between accounts. In many situations, evidence gathered in auditing a balance sheet account (asset, liability, or equity) can be easily expanded to audit a related income statement account.

Required
a. For each of the following accounts:
1. Identify one or more related accounts that could be audited efficiently by expanding on the audit evidence gathered during the audit of the account.
2. Identify how the evidence gathered from auditing the balance sheet account could be used in auditing the related income, equity, or expense account.
b. Explain why auditors generally consider it more efficient to directly test a year-end balance sheet account rather than testing transactions during the year. Does this mean that auditors do not need to test the transactions that make up an account balance; that is, they need to test only the year-end balance? Explain your answer in terms of the reliability and persuasiveness of audit evidence.
Account Balances Audited
1. Marketable Equity Securities
2. Bond Payable
3. Property, Plant, and Equipment
4. Equity Method Investments
5. Capitalized Leases
6. Capitalized Lease Obligations
7. Notes Payable
8. Estimated Warranty Liability (Reserve)
9. Preferred Stock