Question

When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and

repayment separately from the acquisition of goods and services is that:
A) the transactions are related to financing a company rather than to its operations.
B) most capital acquisition and repayment cycle accounts involve few transactions, but each is often
highly material and therefore should be audited extensively.
C) both A and B are correct.
D) neither A nor B is correct

Answer 1

The cycle approach to segment audit treats capital acquisition and repayment separately due to their financing nature and material significance.

Step-by-step explanation:

When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that both A and B are correct. Capital transactions are related to financing a company rather than to its operations, and most capital acquisition and repayment cycle accounts involve few transactions, but each is often highly material and therefore should be audited extensively.

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