Lewis Corporation Has a Few Large Accounts Receivable That Total

question 20

Multiple Choice

Lewis Corporation has a few large accounts receivable that total one million dollars, whereas Clark Corporation has many small accounts receivable that total one million dollars. Misstatement in any one account is more significant for Lewis corporation because of the concept of

• A) materiality.
• B) audit risk.
• C) reasonable assurance.
• D) comparative analysis.

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Definitions:

Deductible

A specific amount of money that an insured individual must pay before an insurance company pays a claim, commonly used in health, auto, and home insurance policies.

Coinsurance

A form of insurance coverage in which the insured party and the insurer share the costs of covered healthcare services according to a predetermined percentage.

Monopsony Power

A market situation where there is only one buyer for a product or service, giving that buyer significant control over the market.

Deferred Benefit Plan

A type of retirement plan that allows participants to postpone receiving retirement benefits until a specific future date, often to optimize tax benefits.