When Evaluating the Risk of Material Misstatement with Regards to Defalcations

question 63

Multiple Choice

When evaluating the risk of material misstatement with regards to defalcations involving receivables (a credit entry to accounts receivable for amounts not received) , the auditor would expect an experienced bookkeeper to most likely
Debit which of the following accounts?

• A) Cash.
• B) Sales returns.
• C) Miscellaneous income.
• D) Accounts payable.

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Definitions:

Product Costs

Costs directly tied to the creation of a product, including raw materials, labor, and manufacturing overhead.

Manufacturing Process

A sequence of operations and processes designed to create a specific product from raw materials or components.

Balance Sheet

A list of the assets, liabilities, and stockholders’ equity as of a specific date, usually at the close of the last day of a month or a year.

Direct Labor

The expenses incurred on salaries for workers directly engaged in manufacturing goods or providing services.