When Undertaking Tests of Controls for Revenues, Auditors Are More

question 2

Multiple Choice

When undertaking tests of controls for revenues, auditors are more concerned with controls associated with the occurrence assertion than they are with the completeness assertion because

• A) clients are more likely to overstate than understate revenues.
• B) clients are more likely to understate than overstate revenues.
• C) it is difficult to determine when services have been performed.
• D) the allowance for doubtful accounts often is understated.

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Definitions:

General Partnership

A business structure where two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a venture.

Participating Investors

Individuals or entities that engage in funding ventures with the expectation of earning a return on their investment.

Liability

The state of being responsible for something, especially by law.

Duty of Loyalty

A legal obligation requiring directors, officers, and agents of a corporation to act in the best interest of the corporation.