An auditor is performing an analytical procedure that involves developing common-size financial statements.This technique is referred to as:
A)Vertical analysis.
B)Horizontal analysis.
C)Cross-sectional analysis.
D)Comparison analysis.

Question

Quizplus · Accepted Answer

Vertical analysis is the procedure of analyzing financial statements in which each line item is presented as a percentage of a base figure within the same period. Common-size financial statements are created using vertical analysis, which assists in discovering trends and patterns in an entity's financial results over time. Horizontal analysis compares data over a specified period of time, cross-sectional analysis compares data across different companies or industries, and comparison analysis compares financial data between various companies or time periods without any specific analytical procedure.

An Auditor Is Performing an Analytical Procedure That Involves Developing