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:

Lectures

Formal presentations or talks given by educators or experts to convey knowledge or information to a group of students or audience.

Production Possibilities Frontier

A graph that represents all the highest possible production levels for two or more products, considering the available inputs like resources and technology.

Comparative Advantage

The ability of a country or firm to produce a particular good or service at a lower opportunity cost than others.

Total World Production

The aggregate amount of goods and services produced globally within a specific time frame, often measured in terms of Gross World Product (GWP).