A Risk of Material Misstatement in Accounts Receivable Associated with the Rights

question 13

Multiple Choice

A risk of material misstatement in accounts receivable associated with the rights and obligations balance-related audit objective is that "consignment goods are recorded as revenue, overstating both revenue and accounts receivable." Which of the following tests of detail of balances would respond to this risk?

• A) include confirmation of terms of sale with accounts receivable confirmations
• B) check cash received after the year end and trace to accounts receivable master file
• C) read the notes to the financial statements and compare to audited financial information
• D) compare accounts receivable balances by customer last year end to this year

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Definitions:

Operant Conditioning

An educational method where the intensity of an action is altered by either encouraging or penalizing it.

Forgetting

The loss of information from long-term memory, often considered a normal process due to various factors like interference, decay, or retrieval failure.

Classical Conditioning

a learning process that occurs when two stimuli are repeatedly paired; a response that is initially elicited by the second stimulus is eventually elicited by the first stimulus alone.

Extinction

In psychology, the gradual weakening and disappearance of a conditioned response when the conditioned stimulus is no longer paired with the unconditioned stimulus.