An Auditor Most Likely Would Limit Substantive Tests of Sales

question 23

Multiple Choice

An auditor most likely would limit substantive tests of sales transactions when control risk is assessed as low for the existence or occurrence assertions concerning sales transactions and the auditor has already gathered evidence supporting:

• A)opening and closing inventory balances.
• B)cash receipts and accounts receivable.
• C)receiving activities.
• D)cutoffs of sales and purchases.

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Definitions:

Profitability Index

A ratio that compares the present value of future cash flows of a project to its initial investment, used to assess the desirability of projects.

Investment Proposals

Plans or suggestions put forward for consideration, primarily for the purpose of making investments.

Profitability Index

A capital budgeting tool that calculates the ratio of the present value of future cash flows to the investment’s initial cost.

Investment Projects

Initiatives undertaken by a business or individual involving the allocation of resources with the expectation of generating future returns.