When Undertaking Tests of Controls for Revenues, Auditors Are More

question 1

Multiple Choice

When undertaking tests of controls for revenues, auditors are more concerned with controls associated with the occurrence assertion than they are with the completeness assertion because:

• A)clients are more likely to overstate than understate revenues.
• B)clients are more likely to understate than overstate revenues.
• C)it is difficult to determine when services have been performed.
• D)the allowance for doubtful accounts is often understated.

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Definitions:

Variable Input

A production factor that can be adjusted in the short term to change the level of output, such as labor or raw materials.

Fixed Costs

Costs that do not change with the level of output produced by a firm, such as rent, salaries, and equipment costs.

Average Total Cost Curve

A graphical representation of the total cost per unit of output, calculated by dividing the total cost by the quantity of output produced.

Diminishing Marginal Returns

A principle stating that as more of a variable input is added to a fixed input, the additional output from each new unit of input will eventually decrease.