An auditor’s analytical procedures indicate a lower than expected return on an equity methodinvestment. This situation most likely could have been caused bya. An error in recording amortization of the excess of the investor’s cost over the investment’s underlying book value.b. The investee’s decision to reduce cash dividends declared per share of its commonstock.c. An error in recording the unrealized gain from an increase in the fair value of availablefor sale securities in the income account for trading securities.d. A substantial fluctuation in the price of the investee’s common stock on a national stockexchange.
An auditor’s analytical procedures indicate a lower than expected return on an equity methodinvestment. This situation most likely could have been caused bya. An error in recording amortization of the excess of the investor’s cost over the investment’s underlying book value.b. The investee’s decision to reduce cash dividends declared per share of its commonstock.c. An error in recording the unrealized gain from an increase in the fair value of availablefor sale securities in the income account for trading securities.d. A substantial fluctuation in the price of the investee’s common stock on a national stockexchange.
Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter7: Planning The Audit: Identifying, And Responding To The Risk Of Material Misstatement
Section: Chapter Questions
Problem 20MCQ
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Question
An auditor’s analytical procedures indicate a lower than expected return on an equity method
investment. This situation most likely could have been caused by
a. An error in recording amortization of the excess of the investor’s cost over the investment’s underlying book value.
b. The investee’s decision to reduce cash dividends declared per share of its common
stock.
c. An error in recording the unrealized gain from an increase in the fair value of availablefor sale securities in the income account for trading securities.
d. A substantial fluctuation in the price of the investee’s common stock on a national stock
exchange.
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