AUDIT RISK Definition

AUDIT RISK is a combination of the risk that material errors will occur in the accounting process and the risk the errors will not be discovered by audit tests. Audit risk includes uncertainties due to sampling (sampling risk) and to other factors (non-sampling risk).

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ABSORPTION PRICING is where all costs, both fixed and variable; plus a percentage mark-up for profit; are recovered in the price.

ACTIVITY RATIO is any accounting ratio that measures a firms ability to convert different accounts within their balance sheets into cash or sales.

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