Q15. Prepaid expenses are costs that have been paid but that apply to future per

Q: Q15. Prepaid expenses are costs that have been paid but that apply to future per

The correct answer is [A] "Obtain or prepare a comparative summary of prepaid expenses balances. trace individual balances to the general ledger and previous audit;s working paper." Reason: This will help auditor to make control that all the required prepaid expenses has been booked.

ID: 2596806 • Letter: Q

Question

Q15. Prepaid expenses are costs that have been paid but that apply to future periods or to the production of future revenue. Which of the is the most appropriate way to test balances for reasonableness, fluctuations and omission of the prepaid expense: A. Obtain or prepare a comparative summary of prepaid expense balances. Trace individual balances to the general ledger and previous audit's working papers. B. Review the balances for reasonableness, expected or unexpected fluctuations between periods and obvious omissions. C. Obtain an understanding of the accounting policies relevant to prepaid expenses and an ysis of those accounts. D. Test mathematical accuracy of the prepaid account.

Explanation / Answer

The correct answer is [A]

"Obtain or prepare a comparative summary of prepaid expenses balances. trace individual balances to the general ledger and previous audit;s working paper."

Reason:

This will help auditor to make control that all the required prepaid expenses has been booked.

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Q15. Prepaid expenses are costs that have been paid but that apply to future per

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