The most effective and efficient audit approach in the examination of the income statement would be which of the following?
A) Examine 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 allows for a thorough analysis and verification of the financial statements as a whole. It can help identify any inconsistencies or errors in the financial statements and ensure that the income statement accounts are accurately reflected in the balance sheet accounts. Comparing net income to other businesses in the industry or to previous years can provide some context, but it does not necessarily guarantee the accuracy of the financial statements. Examining changes in all balance sheet accounts may also be helpful, but it is not specific to the income statement and may not be the most efficient use of audit resources.

The Most Effective and Efficient Audit Approach in the Examination