An Important Method Used by Auditors to Learn of Material

question 59

Multiple Choice

An important method used by auditors to learn of material contingencies is

• A)examining documents in the client's possession concerning contingencies.
• B)inquiring and discussing them with management.
• C)obtaining responses to an attorney letter.
• D)confirming accounts receivable with the client's customers.

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Definitions:

Market Price

The current value at which an asset or service can be bought or sold in an open market.

Economies of Scale

The economic benefits that businesses gain from their size of operations, where the expense per unit of production typically lowers as the scale increases.

Increasing Returns

A situation in which an increase in the scale of production results in a disproportionate increase in output, usually leading to lower average costs.

Suffer Losses

occurs when a business or individual incurs expenses that exceed their revenues.