Which One of the Following Material Occurrences Would Be Most

question 93

Multiple Choice

Which one of the following material occurrences would be most likely to attract the auditor's attention?

• A) deviations from client's established control procedures
• B) monetary errors or irregularities in populations of account balance details
• C) deviations from client's budgeted values
• D) both A and B

Understand the accounting treatments for losses on long-term contracts and special revenue recognition cases such as franchise fees and bundled sales transactions.

Distinguish between revenue recognition methods and their impact on financial statements and retained earnings.

Comprehend the accounting for billings on construction in progress and its effects on balance sheets.

Recognize the ethical considerations related to revenue recognition and the potential for earnings management within GAAP guidelines.

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Definitions:

Caveat Emptor

A Latin phrase meaning "let the buyer beware," indicating that the buyer assumes the risk regarding the quality and condition of the item purchased.

Sales Contract

A legal agreement between a buyer and a seller specifying the terms and conditions of the sale of goods or services.

Strict Product Liability

A legal doctrine that makes manufacturers, distributors, or sellers liable for any defects in the products they market, regardless of fault or negligence.

Defective

Describes something that is flawed or lacking in some essential component, often leading to malfunction or failure.