An Important Reason for Auditors to Obtain Good Knowledge of a Client's

question 23

Multiple Choice

An important reason for auditors to obtain good knowledge of a client's industry is that

• A)payroll processing functions could differ from client to client.
• B)control risks will vary from zero to 100% and can be better assessed in context.
• C)detection risk must be set in accordance with the needs of the industry as well as of the individual client.
• D)organizations like city governments have unique accounting requirements that could be complex.

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset evenly over its useful life.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the company's strategic objectives, focusing on projects that will generate value over time.

Incremental Sales

The increase in sales revenue attributed to a specific marketing effort or event.

Operating Expenses

Costs incurred in the day-to-day operations of a business, excluding the cost of goods sold, such as rent, salaries, and utilities.