A Positive Confirmation Is More Reliable Evidence Than a Negative

question 12

Multiple Choice

A positive confirmation is more reliable evidence than a negative confirmation because

• A)the auditor has a document that can be used in court.
• B)follow-up procedures can be performed if a response is not received from the debtor.
• C)the debtor's lack of response indicates agreement with the stated balance.
• D)fewer confirmations can be sent out.

Explain the significance of alpha in evaluating a security's performance relative to CAPM predictions.

Comprehend the role of diversification in managing unsystematic risk in a portfolio.

Understand the concept of base-rate information and its significance in decision-making.

Recognize the impact of heuristics, such as the availability heuristic, on judgment and decision-making processes.

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Definitions:

Idle Capacity

The portion of a company's production capacity that remains unutilized or is not in active production due to lack of demand, maintenance, or other reasons.

Transfer Price

The price charged for goods or services transferred between departments, divisions, or subsidiaries of the same company, often used for accounting and tax purposes.

Valve Division

A specialized department or segment within a company focused on the production and sale of valves.

Outside Supplier

A third-party provider that delivers products or services to an organization, which the organization does not manufacture or create internally.