The auditors principal objective when using a sample of tests of details of balances is whether the: A. account balance being au
dited is fairly stated. B. controls being tested are operating effectively. C. transactions and account balances being audited are fairly stated. D. transactions being audited are free of misstatements.
A. account balance being audited is fairly stated.
Explanation:
The auditors principal objective when using a sample of tests of details of balances is to know whether the account balance being audited is fairly stated.
To select a sample size for substantive tests of balances, the auditor should consider a decrease in the tolerable misstatements in order to have a larger sample.
D) Transactions being audited are free of misstatements.
Explanation:
Sampling is the process of examining parts of data which can gain a reasonable assurance for a population. When auditor starts to use the sampling test, he believes the account statements are free from errors. All he has to do is just a faint crosschecking to make sure all data are free from materiality. In this type of test, account statements are usually without any form of mistakes. It shows the transactions made are real and has no traces of fraud of any kind.
Auditors may take up the sampling risk which refers to the risk that the auditor's report is inconclusive.
High Operating Leverage represents higher fixed cost in comparison to variable cost, and thus that means the company will get its break even earlier or we can say with low units, but after break even profits will be higher.
As in the given case Firm A has higher Operating Leverage than Firm B, thus Firm A has lower Break even point but eventually its profit after reaching break even will grow higher.
The answer to this question is the term net income. A net income is the remaining money after deductions or expenses have been taken from the gross income. Net income is also known as net profit. Net income also states and calculates the total revenue that exceeds after all operational expenses and taxes been deducted.
