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:

CARS Checklist

A method for evaluating the credibility, accuracy, reasonableness, and support of information sources.

Sophisticated

A term describing something complex, refined, or developed in a high degree of detail.

Biased Results

Outcomes of analyses or experiments that are skewed due to flawed methodology, prejudice, or any factor that deviates from objectivity.

Search Engines

Web-based tools that index and search databases of internet resources, allowing users to find information online by typing keywords or queries.