An Example of a Safeguard to Independence Created by Accounting

question 69

Multiple Choice

An example of a safeguard to independence created by accounting firms is

• A) the establishment of a code of ethics.
• B) legislation that requires that an auditor be independent.
• C) the existence of client acceptance and continuation procedures.
• D) the establishment of an audit committee.

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Definitions:

Safety Stock

A level of extra inventory maintained to mitigate the risk of stockouts caused by variations in supply and demand.

DSO

Days Sales Outstanding; a measure of the average number of days that a company takes to collect revenue after a sale has been made.

Aging Schedule

A table that displays the amounts of receivables from customers, broken down into categories based on the time elapsed since the invoice date.

Seasonal Sales

Sales that are affected by the changes of the season, reflecting variations in consumer behavior and preferences at different times of the year.