The Client Makes Estimates Relative to Recorded Amounts in the Financial

question 115

Multiple Choice

The client makes estimates relative to recorded amounts in the financial statements.In determining the reasonableness of these estimates the auditor should consider which of the following?

• A)Historical trends and information.
• B)Results of reconciliation procedures.
• C)That there is an adequate cushion.
• D)That management hired independent experts to quantify all estimates .

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Definitions:

Short Run

A period in which at least one factor of production is fixed, limiting the ability of businesses to adjust to market conditions fully.

Marginal Revenue

The profit enhancement from selling one more unit of a product or service.

Marginal Cost

The increase in total cost that arises when the quantity produced is incremented by one unit.

Total Profits

The financial gain obtained after subtracting total costs from total revenue over a period.