Which of the Following Responses to a Confirmation of Balances

question 39

Multiple Choice

Which of the following responses to a confirmation of balances at December 31 would be most troubling to an auditor?

• A) We paid this amount on December 28.
• B) We received these goods on January 2.
• C) We returned this amount on December 28 under our standing agreement with the company.
• D) This amount is not due until January 15.

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Definitions:

Consumer Surplus

The contrast between the aggregate amount buyers are willing to shell out for a good or service and the total they actually do.

Total Surplus

The combined benefit that both consumers and producers receive from a transaction, comprising consumer and producer surplus.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e., the market price).

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, often reflecting gains from trade.