When the Auditor Concludes That a Control Is Functioning Properly

question 58

Multiple Choice

When the auditor concludes that a control is functioning properly when,in fact,it is not,the auditor has committed the

• A) risk of underreliance.
• B) risk of overreliance.
• C) risk of incorrect acceptance.
• D) risk of incorrect rejection.

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Definitions:

Fixed Asset Turnover Ratio

A financial indicator that measures a company's ability to generate net sales from fixed-asset investments, specifically property, plant, and equipment.

Financial Statements

Official documentation detailing the financial transactions and status of an entity, such as a company or individual, usually comprising a balance sheet, income statement, and statement of cash flows.

Common Shares

A type of equity ownership in a corporation, where holders have voting rights and potential dividends, but come after preferred shareholders in bankruptcy or liquidation.

FIFO

First-In, First-Out, an accounting method for valuing the cost of goods sold that assumes the first items placed in inventory are sold first.