Explain the differences between each type of audit risk
What will be an ideal response?
Answer: Inherent risk is the threat faced just by conducting business in a chosen way. For example, a business with multiple locations in several foreign countries faces more threats than a business with a single location. Control risk is the threat that a company has inadequate, nonexistent or unenforced policies and procedures to prevent errors and fraud from getting into the system and being reflected in the financial statements. Detection risk is the threat that errors or fraud get into the system and audit procedures do not identify the errors or fraud.
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Chantal applied for life insurance on November 1, but she did not submit a premium payment with the application. She underwent a physical examination on November 10, which she passed, and the results of that exam were forwarded to the insurance company. The policy was issued by the company on November 15, and the agent delivered the policy to Chantal on November 17, at which time she paid the first premium. When did Chantal's coverage become effective?
A) November 17 B) November 1 C) November 10 D) November 15"
KK company bought a delivery truck for $62,000 on January 1, 2009. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, KK paid $2,400 for a one-year insurance policy and $500 for registration fees. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000. If KK uses the straight-line method of depreciation, what is the depreciation expense and book value at the end of 2010?
a. $7,300 and $58,400 b. $6,500 and $60,000 c. $6,790 and $62,320 d. $6,550 and $60,400