In Many Audits of Sales Transactions, No Substantive Tests of Transactions

question 12

Multiple Choice

In many audits of sales transactions, no substantive tests of transactions are performed for the completeness objective because:

• A) the unrecorded sales cause a reduction of accounts receivable; therefore, the ratios of the two financial statements will not be misleading.
• B) understatements of assets and income are a greater concern than overstatements.
• C) overstatements of assets and income are a greater concern than understatements.
• D) it doesn't matter if income is understated because the savings on income tax offsets the reduced revenue and net income is correct.

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Definitions:

Brand Loyal

The tendency of consumers to continuously purchase one brand's products over the competition.

Environmental Scanning

is the process of systematically gathering information about the external environment to identify potential threats and opportunities.

Competitive Intelligence

The process of gathering, analyzing, and using information about competitors, market trends, and the business environment to support strategic decision making.