ASA 700 Provides Explanatory Guidance on All of These Points

question 5

Multiple Choice

ASA 700 provides explanatory guidance on all of these points except:

• A) The form and content of the auditor's report.
• B) The matters the auditor usually considers in forming an opinion.
• C) The training of junior audit staff.
• D) The auditor's performance and reporting responsibilities.

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Definitions:

Operating Leverage

Refers to the extent to which fixed costs are used in a company's operations; high operating leverage means a larger proportion of fixed costs, leading to greater potential for profit variability with changes in sales volume.

Pretax Net Income

The amount of income that a company has earned before any taxes have been deducted.

CVP Analysis

Cost-Volume-Profit Analysis, a financial tool used to determine how changes in cost and volume affect a company's operating income and net income.

Pre-Tax Net Income

The income earned by a business before the deduction of tax expenses.