Auditors Sometimes Encounter Situations in Which the Outcome of a Matter

question 49

Multiple Choice

Auditors sometimes encounter situations in which the outcome of a matter cannot be reasonably estimated at the time the financial report is issued. These matters are referred to as:

• A) non sequiturs.
• B) inestimable matters.
• C) in suspense matters.
• D) significant uncertainties.

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Definitions:

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded in the financial statements, representing liabilities.

Accrued Revenues

Accrued revenues are earnings recorded in the financial statements for goods delivered or services provided, although no cash has been received yet.

Prepaid Items

Prepaid items refer to expenses paid in advance for goods or services to be received in the future.

Adjusting Entries

These are journal entries made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.