There Are Numerous Factors That Contribute to the Risk of Misstatement

question 42

Essay

There are numerous factors that contribute to the risk of misstatement in the assertions for inventories and cost of sales. List four of these factors.
1. Because transactions relating to property, plant, and equipment are few and usually individually material, assessment of control risk relating to these transactions is rarely necessary.
2. Property, plant, and equipment is often the largest category of assets on the balance sheet and therefore expenses associated with this account are material factors in the determination of profit.
3. There may be significant variation in the inherent risk assessments for assertions relating to different property, plant, and equipment accounts. Inherent risk may be assessed as low under one assertion but high under another. Factors that impact on the assessment of inherent risk include the nature of the business and the form of purchase or lease of the asset.

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Definitions:

Urban Crime Rate

The number of recorded criminal acts per unit of population or a specific time period within an urban area.

Urban Political Machines

Political organizations in cities, particularly prominent in the late 19th and early 20th centuries, that controlled electoral outcomes through patronage and corruption.

Industrial Development

The extensive growth and advancement of economic and manufacturing sectors within a country or region, often associated with technological innovation.

Urban Poor

Individuals and families living below the poverty line in urban areas, often facing issues related to housing, employment, and access to services.