Which of the Following Is a Limitation of Using Observation

question 282

Multiple Choice

Which of the following is a limitation of using observation as a manual audit procedure?

• A) Observation provides information at a certain time and makes it difficult to draw representative conclusions.
• B) Observation is not as persuasive as inquiry due to a lack of direct evidence.
• C) Observation is performed specifically to test the validity of documented or recorded information.
• D) Observation may cause individuals to behave less critically or carefully if they are aware that other forms of manual audit procedures have already taken place.

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Definitions:

Goodwill

An intangible asset that represents the portion of the business value that cannot be attributed to other business assets.

Loss on Disposal

The financial loss incurred when an asset is sold for less than its carrying value on the books.

Other Revenue

Income generated from activities not related to a company’s primary operations.

Fixed Assets

Long-lasting physical resources used in the functioning of a business, not expected to be spent or transformed into cash over the course of one year.