In the Case of an Audit, Recklessness Is Present If

question 84

Multiple Choice

In the case of an audit, recklessness is present if the auditor knew an adequate audit was not done but still issued an opinion, even though there was no intent to deceive financial statement users. This is a description of the legal term

• A) ordinary negligence.
• B) gross negligence.
• C) constructive fraud.
• D) fraud.

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Definitions:

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding production costs but including items like rent, utilities, and payroll.

Net Income

The total profit of a company after all expenses, including taxes, cost of goods sold, and operating expenses, have been deducted from total revenue.

Variable Costing

Another perspective: A costing methodology that treats only those costs that vary with production level as product costs, emphasizing the impact of fixed costs on profitability.

Special Order Decisions

Special order decisions involve determining whether a business should accept or decline a custom order that differs from normal sales, considering capacity and costing.