When Should Auditors Not Perform Alternative Procedures in Testing the Accounts

question 24

Multiple Choice

When should auditors not perform alternative procedures in testing the accounts receivable balance?

• A)When customers do not return positive confirmation requests
• B)When customers do not return negative confirmation requests
• C)When confirmations are deemed to be ineffective as an audit procedure
• D)When confirmations are too costly to use

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Definitions:

Diminishing Marginal Returns

A principle stating that if one factor of production is increased while others are kept constant, the resulting increase in output will eventually decline.

Short-Run Average Total Cost (ATC)

The total cost per unit of output in the short run, where some factors of production are fixed.

Profit-Maximizing Level

The output level at which a firm achieves the highest profit, where marginal revenue equals marginal cost.

Average Total Costs (ATC)

A rephrasing of Average Total Cost, it calculates the per-unit production cost by dividing the total cost by the total quantity of goods produced.