An Intimidation Threat Occurs When

question 68

Multiple Choice

An intimidation threat occurs when

• A) it is difficult to believe the actions of management because there is a suspicion of irregular activity with respect to the recording of transaction activity.
• B) the auditor suspects that fraud has occurred at the middle management level of the organization.
• C) the auditor has been working on a client engagement for many years and has trouble believing that management would deceive the auditors.
• D) a client threatens the firm or its staff with respect to the content of the financial statements or with respect to the conduct of the audit.

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Definitions:

Temporary Account

An account that is cleared to zero at the end of an accounting period to calculate income and expenses for that period.

Gross Profit Margin

A financial metric indicating the percentage of revenue that exceeds the cost of goods sold, reflecting the efficiency of a company in managing its production costs.

Normal Balances

The default side (debit or credit) of an account that is increased, reflecting the account's nature in double-entry bookkeeping.

Purchase Discounts

Reductions in price given by suppliers to buyers as an incentive for early payment of invoices or bulk purchases.