Which of the Following Best Describes the Concept of Audit

question 33

Multiple Choice

Which of the following best describes the concept of audit risk?

• A) The risk of the auditor being sued because of association with an auditee.
• B) The risk that the auditor will provide an unqualified opinion on financial statements that are, in fact, materially misstated.
• C) The overall risk that a material misstatement exists in the financial statements.
• D) The risk that auditors use audit procedures that are inappropriate.

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Definitions:

Variable Cost Method

An accounting method where product costs include variable expenses, changing with the level of output, but exclude fixed costs.

Markup Per Unit

The sum added onto the purchase price of products to account for overhead costs and generate profit.

Unit Selling Price

The amount of money charged to the customer for a single unit of product or service.

Contribution Margin

The difference between sales revenue and variable costs, representing the amount that contributes to covering fixed costs and generating profit.