When Testing the Controls for the Completeness Transaction-Related Audit Objectives

question 39

Multiple Choice

When testing the controls for the completeness transaction-related audit objectives,

• A) failure to record the acquisition of goods or services will generally understate net income.
• B) failure to record the acquisition of goods or services has no impact on the balance sheet.
• C) it is generally easy for the auditor to determine whether unrecorded transactions exist.
• D) the audit time for accounts payable can be reduced if the client has effective internal controls and the auditor properly tests those controls.

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Definitions:

Free Riding

Occurs when individuals benefit from resources, goods, or services without paying for them, often in the context of public goods.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are accessible to all members of a society and one individual's consumption does not reduce availability to others.

Subsidize

The act of providing financial assistance to individuals, businesses, or industries to support or promote economic activities.

Basic Research

Fundamental scientific research aimed at increasing understanding and knowledge, without specific immediate commercial applications.