Which one of the following types of accounting would most likely result in the establishment of a contract between two parties?

• A. Financial accounting
• B. Managerial accounting
• C. Tax accounting
• D. Auditing (attestation services)

Answer: (D)

Verified step by step guidance

1. Understand the concept of auditing: Auditing involves the examination of financial statements and records to ensure accuracy and compliance with established standards. It often results in an attestation service, where an auditor provides an independent opinion on the reliability of financial information.
2. Recognize the role of contracts in auditing: Auditing typically requires a formal agreement or contract between the auditor and the client. This contract outlines the scope of the audit, responsibilities, and deliverables, ensuring both parties are clear on expectations.
3. Differentiate auditing from other types of accounting: Financial accounting focuses on preparing financial statements, managerial accounting aids internal decision-making, and tax accounting deals with compliance and tax planning. Auditing, however, involves verifying the accuracy of financial information and providing assurance services.
4. Understand why auditing leads to contracts: Since auditing involves an independent third party providing assurance, a contract is necessary to establish the terms of the engagement, including confidentiality, scope, and fees.
5. Conclude that auditing (attestation services) is the type of accounting most likely to result in the establishment of a contract between two parties, as it formalizes the relationship and expectations between the auditor and the client.