When the Auditor Has the Same Level of Willingness to Risk

question 35

Multiple Choice

When the auditor has the same level of willingness to risk that material errors will exist after the audit is finished for all five cycles,

• A)the same amount of evidence will be gathered for each cycle.
• B)a different extent of evidence is needed for various cycles.
• C)he/she has not followed generally accepted auditing standards.
• D)the level for each cycle must be no more than 2% so that the entire audit does not exceed 10%.

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Definitions:

Accounting Cycle

A series of steps performed during an accounting period, starting with recording transactions and ending with the preparation of financial statements.

Balance Sheet

An inventory of a company's financial resources, debts, and shareholders' stake, captured at a particular moment.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period of time, resulting in a net income or loss.

Post-closing Trial Balance

A list of all accounts and their balances after closing entries are made, serving as a check to ensure that debits equal credits.