When Management Is Unable to Provide an Explanation for a Previously

question 158

True/False

When management is unable to provide an explanation for a previously unrecognized risk identified through the analytical procedures, the auditor must issue an adverse opinion.

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Definitions:

Reasonable Assurance

A high level of certainty provided through internal controls and procedures to prevent and detect errors or fraud in financial reporting.

Vulnerabilities

Weaknesses or flaws in a system that can be exploited to compromise its security or functionality.

Outstanding Checks

Outstanding checks refer to checks that have been written and recorded in the paying account but have not yet been cashed or cleared by the bank.

Bank Statement Adjustment

The act of reconciling the bank statement balance with the book balance by accounting for items that cause discrepancies between the two.