When an Entity Moves into a Significant New Line of Business

question 35

Multiple Choice

When an entity moves into a significant new line of business, all of the following increase except:

• A)client risk.
• B)acceptable audit risk.
• C)risk of material misstatement.
• D)entity business risk.

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Definitions:

Merchandise Inventory

Goods that a company holds for the purpose of selling to customers in the ordinary course of business.

Monthly Depreciation

The portion of a fixed asset's cost allocated as an expense over a single month, reflecting the asset's decrease in value over time.

Accounts Payable

Accounts Payable is the amount of money owed by a business to its suppliers or creditors for goods and services purchased on credit.

Production Costs

The combined expenses associated with manufacturing a product, including labor, materials, and overhead costs.