Question
For each of the items below: (1) identify the account(s) that need(s) to be audited carefully and (2) state the reason; for example, potential overstatement
For each of the items below:
(1) identify the account(s) that need(s) to be audited carefully and
(2) state the reason; for example, "potential overstatement or understatement of _______."
4 Scenarios provided below - respond to points (1) and (2) above: [A] Current-year fixed assets total is larger than last year but current amortization expense is the same as last year. [1 mark] [B] Current year long-term liabilities are larger than last year but the interest expense is the same. [1 mark]
[C] Current year inventory is larger than last year but the current year gross margin (profit) is larger. [1 mark]
[D] Current year accounts receivable is larger than last year but the allowance for doubtful accounts is the same. [2 marks]
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