An Auditor Assesses the Level of Control Risk To

question 50

Multiple Choice

An auditor assesses the level of control risk to:

• A)determine whether the entity is a going concern.
• B)determine the extent of substantive tests to be performed.
• C)ascertain whether irregularities are probable.
• D)ascertain whether any employees have incompatible duties.

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Definitions:

Revenue Recognition

The accounting principle that dictates the conditions under which revenue is recognized and recorded, often requiring that revenue is earned and measurable.

Implicit Rate

An interest rate that is indirectly indicated but not explicitly defined, often used in lease agreements to represent the lessor’s return.

Fair Value

The financial return from unloading an asset or the expense of reallocating a liability in a formalized negotiation among market counterparts at the point of evaluation.

Economic Life

Refers to the expected period of time during which an asset is useful to the average owner.