With Respect to Understanding the Client's Revenue Process, It Is

question 43

Multiple Choice

With respect to understanding the client's revenue process, it is particularly important that the auditor ________.

• A)makes some preliminary inquiries with the client's attorney
• B)be knowledgeable about the entity, how the entity earns revenues, and particular revenue recognition issues that may be relevant to the entity
• C)examines other firms within the client's industry to determine acceptable practices
• D)uses accounting standards as an optional guide to determining what the client should be recording

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Definitions:

Raw Materials Inventory

The total cost of all components and materials stored that are eventually used in the manufacture of a product.

Master Budget

A comprehensive financial planning document that includes all of the organization's financial plans.

Credit Sales

Sales made to customers on credit, allowing them to purchase now and pay later, creating accounts receivable for the company.

Selling Expense

Costs incurred to promote, sell, or distribute a product or service, such as advertising and commission.