Performance Materiality as Set by the Auditor

question 26

Multiple Choice

Performance materiality as set by the auditor:

• A) does not affect inherent or control risks.
• B) increases inherent risk only.
• C) increases control risk only.
• D) increases inherent risk and control risk.

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Definitions:

Accrue Expense

An accounting method where expenses are recognized when incurred but not yet paid, reflecting the economic reality of the expense.

Prepaid Utilities

Expenses paid in advance for utilities services, recognized as assets on the balance sheet until they are consumed.

Accounting Cycle

The collective process of recording and processing the accounting events of a company, starting from the transaction occurrence to the preparation of financial statements.

Reporting Period

The specific timeframe for which financial statements are prepared, showing the financial position and performance of a company.