Audit of Sole Proprietorship and Partnership Accounts
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Questions and Answers

What is one common challenge in auditing a sole proprietorship?

  • Difficulty in determining profit-sharing provisions
  • Difficulty in segregating personal and business transactions (correct)
  • Difficulty in tracing initial capital investment
  • Difficulty in obtaining written partnership agreements

    • What should auditors verify when auditing a sole proprietorship account?

  • Written partnership agreement
  • Method used in dividing the year's earnings
  • Distribution of net income
  • Additions to cash asset records (correct)

    • What should auditors be particularly interested in when auditing partnership accounts?

  • Verifying personal expenditures paid with company funds
  • Obtaining written partnership agreements
  • Ensuring distribution of net income according to profit-sharing provisions (correct)
  • Segregating personal and business transactions

    • What may auditors suggest if a partnership operates without a written partnership agreement?

    <p>Obtain written statements confirming the balance in each partner's capital account</p> Signup and view all the answers

    What corrections may be required in auditing a sole proprietorship account?

    <p>Transferring from expense accounts to owner's drawing account any personal expenditures paid with company funds</p> Signup and view all the answers

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