Because of the Risk of Material Misstatement,an Audit of Financial

question 46

Multiple Choice

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

• A) Objective judgment.
• B) Independent integrity.
• C) Professional skepticism.
• D) Impartial conservatism.

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thus preparing the books for the next period.

Income Summary

An account used in the closing process that summarizes revenues and expenses for a period, transferring the net amount to retained earnings.

Sales Returns

Transactions where customers return defective, unsatisfactory or unwanted products back to the seller, resulting in a reversal of revenue.

Accounts Receivable

Financial obligations of customers towards a business for delivered but unpaid goods or services.