There Are Several Reasons Why the Auditor Is Responsible for Reasonable

question 45

Multiple Choice

There are several reasons why the auditor is responsible for reasonable but not absolute assurance. One of them is that:

• A) most audit evidence results from testing a sample of a population and sampling involves minimal risk.
• B) accounting presentations contain complex estimates that can be convincing.
• C) audit testing and the evaluation of test results require significant auditor judgement, and auditors can make errors in judgement.
• D) fraudulently prepared financial statements are often extremely difficult, but not impossible, for the auditor to detect.

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Definitions:

Book Value

The net value of an asset or company based on its balance sheet accounts, calculated as assets minus liabilities.

Accumulated Depletion

The total amount charged against the natural resources (like timber, minerals, and oil) a company has extracted, reflecting the decrease in value of those resources.

Balance Sheet

A financial statement that displays the assets, liabilities, and owner's equity of an entity at a specific point in time, outlining its financial position.

Cost Allocation

The process of identifying, aggregating, and assigning costs to cost objects, such as products or departments.