The most effective and efficient audit approach in the examination of the income statement would be which of the following?
A) Examination of income statement accounts concurrently with the related balance sheet accounts.
B) Compare company's components of net income to other businesses in the same industry.
C) Compare company's components of net income to the previous two years.
D) Examine changes in all balance sheet accounts.

Question

Quizplus · Accepted Answer

Examining income statement accounts concurrently with the related balance sheet accounts is the most effective and efficient approach as it ensures accuracy, completeness, and consistency in the financial statements. This approach also enables auditors to identify any misstatements or irregularities in both the income statement and balance sheet accounts, providing a more comprehensive view of the financial health of the company. Comparing components of net income to other businesses and previous years can be useful but may not provide a complete picture without examining concurrent balance sheet accounts. Examining changes in all balance sheet accounts may be too broad and time-consuming.

The Most Effective and Efficient Audit Approach in the Examination