The Auditor Should Plan the Audit of the Revenue Business

question 5

Multiple Choice

The auditor should plan the audit of the revenue business process with the following presumption

• A)that there is a risk of material misstatement due to fraud relating to revenue recognition.
• B)that professional skepticism is necessary to find misstatements.
• C)that evidence gathering and planning the audit require a questioning mind.
• D)that the general environment or tone in the company may allow management to rationalize committing fraud.

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Definitions:

Marginal Productivity

The additional output generated by employing one more unit of a particular resource, while holding other inputs constant.

Returns to Scale

The rate at which production output increases in response to proportional increases in all inputs.

Average Cost

The average cost is the total cost of production divided by the number of units produced, reflecting the cost per unit of output.

Marginal Cost

The supplementary expenditure required to produce an extra unit of a product or service.