If the Auditor Is Auditing Revenues and Identifies Gaps in the Sequence

question 5

Multiple Choice

If the auditor is auditing revenues and identifies gaps in the sequence of pre-numbered sales invoices, _______.

• A)the auditor is unlikely facing a completeness problem, even if the file reconciles with the general ledger
• B)the auditor may be facing a completeness problem, even if the file reconciles with the general ledger
• C)the auditor may be facing a valuation problem, even if the file reconciles with the general ledger
• D)the auditor is unlikely facing a valuation problem, even if the file reconciles with the general ledger

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Definitions:

Paid-In Capital

Capital received from investors in exchange for stock, representing the funds that shareholders have invested in the company.

Treasury Stock

Shares that were once outstanding but have been bought back by the issuing company, reducing the amount of stock on the open market.

Balance Sheet

A financial statement summarizing a company's assets, liabilities, and shareholders' equity at a specific point in time.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders.