An Auditor Who Audits a Business Cycle That Has Low

question 50

Multiple Choice

An auditor who audits a business cycle that has low inherent risk should:

• A)increase the amount of audit evidence gathered.
• B)assign more experienced staff to that area.
• C)increase the performance materiality level for the area.
• D)expand planning procedures.

---

Definitions:

Net Income

The net profit of a company calculated after expenses and tax deductions from its total revenue.

Net Loss

The amount by which total expenses exceed total revenues in a company, indicating a financial loss.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate revenue and expenses to the period in which they actually occurred.

Income Summary

An account used in the closing process that summarizes the revenues and expenses for a specific accounting period before transferring the net income to retained earnings.