Explain What Is Meant by the Following Terms

question 23

Essay

Explain what is meant by the following terms:
(i) Audit risk
(ii) Inherent risk
(iii) Control risk
(iv) Detection risk

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Definitions:

Allowance Method

A technique in accounting used to account for bad debts, where anticipated uncollectible accounts receivable are estimated and recorded.

Adjusting Entry

Journal entries made in accounting to update records for expenses and revenues not recorded during an accounting period.

Bad Debt Expense

The estimated amount of accounts receivable that a company does not expect to collect, recognized as an expense on the income statement.

Maturity Value

The amount to be paid to the holder of a financial instrument at its maturity date, including principal and any remaining interest.