Which of the following is an analytical procedure that should be applied to the income statement?
A)Select sales and expense items and trace amounts to related supporting documents.
B)Ascertain that the net income amount in the statement of cash flows agrees with the net income amount in the income statement.
C)Obtain from the proper client representatives,the beginning and ending inventory amounts that were used to determine costs of sales.
D)Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.

Question

Quizplus · Accepted Answer

Analyzing the income statement by comparing actual revenues and expenses with the previous year's figures is a common analytical procedure. This helps identify any significant differences and investigate the reasons for such differences. Hence, option D is the correct choice. Option A pertains to vouching, B to the statement of cash flows, and C to inventory observations, which are not directly related to analyzing the income statement.

Which of the Following Is an Analytical Procedure That Should