Auditing Standards (SAS No

question 46

Multiple Choice

Auditing standards (SAS No. 99 and SAS No. 54) require the auditor to communicate all management frauds and illegal acts to the audit committee:

• A) only if the act is immaterial.
• B) only if the act is material.
• C) only if the act is highly material.
• D) regardless of materiality.

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Definitions:

Gross Profit Percentage

A financial ratio showing the proportion of money left over from revenues after accounting for the cost of goods sold.

Contract Price

The total amount agreed upon in a contract for the sale of goods, services, or property.

Involuntary Conversion

The forced exchange of an asset into a different form or property, often due to theft, casualty or condemnation, with potential tax implications.

Deferred Gain

A profit from the sale of property or an investment that has been realized but not recognized for tax purposes in the current period.