Inherent Risk Is Reduced Where the Likelihood of Misstatement Is

question 16

Multiple Choice

Inherent risk is reduced where the likelihood of misstatement is low.This would be true for accounts receivable if most balances in accounts receivable were:

• A) from related parties.
• B) overdue.
• C) from overseas customers.
• D) current.

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Definitions:

Net Income

The net income of a company once all costs, taxes, and losses have been deducted.

Partial Equity Method

An accounting technique used when a company has significant influence over another company but does not control it outright, recognizing income to the extent dividends are received.

Net Income

The total earnings of a company after subtracting all expenses and taxes from total revenue.

Annual Amortization

The process of gradually writing off the initial cost of an intangible asset over its useful life on a yearly basis.