In many audits of sales transactions substantive tests of transactions can be reduced in determining the completeness objective because
A) understatements of assets and income are a greater concern than overstatements.
B) overstatements of assets and income are a greater concern than understatements.
C) it doesn't matter if income is understated because the savings on income tax offsets the reduced revenue and net income is correct.
D) the unrecorded sales cause a reduction of accounts receivable; therefore, the ratios of the two financial statements will not be misleading.
B
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Acme, Inc., a publicly traded company with a market value of $50 million,
a. is exempt from filing an auditor's report on management's assessment of internal controls. b. is exempt from filing stock transaction reports with the SEC. c. is exempt from the requirement that its CFO certify the accuracy of the corporate financial statements. d. is exempt from the requirement to improve the directors' monitoring of officer's activities.
A risk manager was attempting to estimate how many physical damage claims would be reported for vehicles in the company's fleet the following year. He decided to perform a regression analysis using "number of vehicle claims" as the dependent variable. It would make sense to use each of the following variables as the independent variable EXCEPT:
(a) number of vehicles in the fleet (b) gallons of fuel used by fleet vehicles (c) number of people employed by the company (d) number of miles driven by fleet vehicles per year