The Risk That the Auditor Concludes That a Material Misstatement

question 1

Multiple Choice

The risk that the auditor concludes that a material misstatement exists when it does not is called _______.

• A)risk of incorrect rejection
• B)risk of incorrect acceptance
• C)risk of incorrect statement
• D)risk of incorrect valuation

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Definitions:

Trading Investments

Securities that a company holds for the purpose of selling them in the near term to profit from short-term price fluctuations.

Depreciation Expense

A non-cash expense that reduces the value of tangible assets over their useful life due to wear and tear or obsolescence.

Indirect Method

A method for preparing the cash flow statement, where net income is adjusted for non-cash transactions and changes in working capital.

Net Income

The net income of a business once all costs and taxes are subtracted from its total revenue.