The major problem for an auditor of segment information:
A) is that 50 percent of sales is not always sold externally.
B) is that sales and profits are given by line of business, but sales only for geographic segments.
C) is segment identification
D) is that profits are given by geographic area but not line of business.

Question

Quizplus · Accepted Answer

Segment identification is the major problem for an auditor of segment information because it requires the entity to properly identify and report its operating segments in accordance with the applicable accounting standard. This process can be complex and subjective, and if segments are not properly identified, the segment information provided may be inaccurate or misleading. The other options (A, B, D) are not the major problem for an auditor of segment information. Option A relates to the issue of intercompany transactions or transfers, which can be a challenge in segment reporting, but it is not the major problem. Option B is incorrect because profit information can be provided for both line of business and geographic segments, depending on the entity's reporting practices. Option D is also incorrect because sales and profits can be provided for both geographic and line of business segments, depending on the entity's reporting practices.

The Major Problem for an Auditor of Segment Information