The Text Described Seven Types of Audits Common in Accounting

question 5

Multiple Choice

The text described seven types of audits common in accounting practice.Which of the following statements about them is most true?

• A)An adverse report in a financial statement audit is evidence that an investigative audit is needed.
• B)Expectancy theory can be useful in many types of audits.
• C)Both an adverse report in a financial statement audit is evidence that an investigative audit is needed and expectancy theory can be useful in many types of audits are true.
• D)Neither an adverse report in a financial statement audit is evidence that an investigative audit is needed nor expectancy theory can be useful in many types of audits is true.

---

Definitions:

MSB Curve

The Marginal Social Benefit curve, representing the additional benefit to society as a whole from consuming one more unit of a good.

MCA Curve

A term that could be mistaken but likely refers to the Marginal Cost Curve, which depicts the additional cost of producing one extra unit of output.

Marginal External Cost

The additional cost incurred by society as a whole due to one more unit of a good being produced, not accounted for by the producer.

Competitive Price

The price at which a product or service is sold that is reasonably close to the prices of competing products or services in the same market.