When Determining the Inherent Risk Related to an Account Balance

question 14

Multiple Choice

When determining the inherent risk related to an account balance, an auditor theoretically does not explicitly consider the:

• A)liquidity of the account.
• B)degree of management estimation involved in determining the proper account balance.
• C)related internal control policies and procedures.
• D)complexity of calculations involved.

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Definitions:

Interest Income

Revenue earned from deposit accounts or investments through the interest paid by the borrower or issuer.

Non-Operating Activities

Financial actions and events that are not tied to a company’s primary, day-to-day operations, such as investing and financing transactions.

Statement of Income

A financial report that shows a company's revenues, expenses, and profits or losses over a specific period of time.

Non-Operating Activities

Transactions and events that are not related to the primary activities of the business.