The Auditor of ABC Ltd

question 34

Multiple Choice

The auditor of ABC Ltd.has concluded that there are significant risks of misstatement of revenue at the company with potential overstatement of revenue.Which of the following audit tests should the auditor conduct to address this significant risk?

• A)control tests of authorization to ensure that credit limits for sales are all approved by the sales manager
• B)analytical review of sales comparing sales trends over the last five years by division and to the industry
• C)examination of sales after the year end to quantify potential cutoff errors (income from the subsequent period included in the current year)
• D)risk assessment procedures looking carefully at inherent risks associated with the handling of cash in the sales cycle

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Definitions:

Linguistic Relativity

The hypothesis that the structure of a language affects its speakers' world view or cognition, and thus people's perceptions are relative to their spoken language.

Linguists

Specialists in the study of language, including its structure, development, and relationship among languages.

Holism

An approach or theory that emphasizes the importance of studying systems as wholes, rather than merely their parts, to understand their structure, function, and evolution.

Cross-cultural Data

information and research findings collected from different cultures used to compare and understand the diversity of human behavior and societies.