Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 50

An internal auditor considers the financial statement of an organization as part of a financial assurance engagement. The auditor expresses the organization's electricity and depreciation expenses as a percentage of revenue to be 10% and 7% respectively. Which of the following techniques was used by the internal auditor in this calculation?

Answer options

Correct answer: B

Explanation

The correct answer is B, vertical analysis, which involves expressing financial statement items as a percentage of a base amount, such as revenue. Horizontal analysis looks at trends over time, ratio analysis compares different financial metrics, and trend analysis focuses on patterns over multiple periods, none of which apply to the percentage calculations performed by the auditor.