When an auditor calculates return on assets and compares it with previous periods, this type of evidence is an example of:
A) observation.
B) physical examination.
C) inquiry.
D) analytical procedures.

Question

Quizplus · Accepted Answer

The auditor is using analytical procedures to calculate the return on assets and comparing it with previous periods to identify any unusual fluctuations or discrepancies. This type of evidence is based on the analysis of financial ratios and trends, which is a commonly used audit technique to evaluate the reasonableness of financial information. Therefore, the best choice is analytical procedures.

When an Auditor Calculates Return on Assets and Compares It