Lewis Corporation Has a Few Large Accounts Receivable That Total

question 20

Multiple Choice

Lewis Corporation has a few large accounts receivable that total one million dollars, whereas Clark Corporation has many small accounts receivable that total one million dollars. Misstatement in any one account is more significant for Lewis corporation because of the concept of

• A) materiality.
• B) audit risk.
• C) reasonable assurance.
• D) comparative analysis.

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Definitions:

Fixed Expenses

Expenses that do not change with the level of production or business activity, such as rent, salaries, and insurance premiums.

Departmental Cost Analysis

The process of evaluating and breaking down the costs associated with each department within an organization, facilitating budgeting and efficiency improvements.

Direct Costs

Direct costs are expenses that can be directly traced to the production of a specific good or service, without any allocation.

Delivery Expenses

Costs associated with the transport of goods from the seller to the buyer, which can include freight, packaging, and handling fees.