A Significant Risk Is an Identified and Assessed Risk of Material

question 51

Multiple Choice

A significant risk is an identified and assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration.Which of the following would be classified as a significant risk?

• A)A risk related to a significant economic or accounting development.
• B)A risk related to transactions for a simple operating lease, like you sign when you rent an apartment.
• C)A risk that does not involve a related party transaction.
• D)A risk related to a transaction that involves a recording error, but was not intentional, like a fraud.

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Definitions:

Indirect Costs

Costs that are not directly accountable to a cost object, such as overhead and administrative expenses.

Production Plant

A facility where goods are manufactured or assembled, using labor and machinery.

Given Unit

A specific quantity or measure that serves as a standard or reference for tasks or calculations in various contexts.

Cash Discount

is a reduction in the invoice amount offered to purchasers as an incentive for early payment, improving cash flow.