Madison Is in the Process of Gathering Evidence to Support

question 9

Multiple Choice

Madison is in the process of gathering evidence to support the audit opinion on Jefferson & Adams, Inc. She's a new staff accountant and wants to make sure she exercises the appropriate level of professional skepticism. Madison asks for your advice as the senior on the audit. How best might you guide her as to the skepticism issues?

• A) Accept management's representation unless they fail to provide adequate supporting documentation
• B) Always review the evidence you gather to assess persuasiveness
• C) Approach the audit assuming fraud does exist
• D) Keep an open mind and rely on your team in making professional judgments

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Definitions:

Substitute Goods

Products or services that can be used in place of one another, fulfilling the same needs or wants of the consumer.

Normal Goods

Goods for which demand increases as the income of the consumer increases, exhibiting a direct relationship between income and demand.

Complementary Goods

Goods that are typically consumed together, such that the demand for one increases when the price of the other decreases.

Substitute Goods

Goods that can be used in place of each other, where an increase in the price of one leads to an increase in demand for the other.