The Audit Process Has Three Categories of Audit Phases: Risk

question 61

Multiple Choice

The audit process has three categories of audit phases: risk assessment, risk response, and reporting. Which of the following are part of the risk assessment process?

• A) preplanning, design further audit procedures, tests of control
• B) client risk profile, plan the audit, design further audit procedures
• C) client acceptance, understand the entity, plan the audit
• D) preplanning, plan the audit, design further audit procedures

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Definitions:

LIFO Inventory

LIFO inventory is a method of inventory valuation where the most recently produced or purchased items are recorded as sold first, potentially reducing taxes in periods of inflation.

Sales Exceed Production

A situation where the demand for a company's products surpasses its current production capacity or available inventory.

Variable Costing

An accounting method that only includes variable costs—costs that vary with production levels—when calculating the cost of producing a good or service.

Net Operating Income

The profit generated from a company’s everyday business operations, calculated by subtracting operating expenses from revenue.