Which of the Following Is an Accurate Statement Regarding Inherent

question 75

Multiple Choice

Which of the following is an accurate statement regarding inherent risk?

• A) The profession has established guidelines for setting inherent risk.
• B) Auditors are generally conservative in setting inherent risk.
• C) Factors impacting inherent risk will affect all cycles, balances, and disclosures.
• D) Inherent risk has no impact on the amount of evidence gathered.

---

Definitions:

Administrative Expenses

Costs related to the general operation of a business that are not directly linked to production or sales, such as salaries of office staff and utilities.

Cash Disbursements

The payments a company makes during a period, including expenses, debt payments, and purchase of assets.

Manufacturing Overhead

Indirect factory-related costs that are incurred when producing a product, including costs associated with maintenance, utilities, and quality control.

Fixed Selling Expenses

Fixed selling expenses are those costs associated with selling a product that do not change with the level of production or sales, such as salary of sales staff and rent for office space.