In Many Audits of Sales Transactions, No Substantive Tests of Transactions

question 63

Multiple Choice

In many audits of sales transactions, no substantive tests of transactions are performed for the completeness objective because:

• A) understatements of assets and income are a greater concern than overstatements.
• B) it doesn't matter if income is understated, because the savings on income tax offsets the reduced revenue, so net income is correct.
• C) the unrecorded sales cause a reduction of accounts receivable; therefore, the ratios of the two financial statements will not be misleading.
• D) overstatements of assets and income are a greater concern than understatements.

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Definitions:

Budget Line

A graphical representation of all possible combinations of two goods that an individual can afford with a given income and prices.

Isoquant

A curve that represents all the combinations of inputs that produce the same level of output in production theory.

Consumer Theory

A branch of microeconomics that studies how people decide what to spend their money on based on their preferences and budget constraints.

Corporate Policy

Guidelines and rules established by a company to dictate its operations, decisions, and organizational behavior.