When Either the Auditor's Quantitative (Statistical) or Qualitative Assessments of Sample

question 165

Multiple Choice

When either the auditor's quantitative (statistical) or qualitative assessments of sample results support the conclusion that the population is materially misstated, _______.

• A)professional judgment should be used in deciding on an appropriate course of action
• B)the auditor should immediately withdraw from the engagement
• C)the auditor should consider notifying the audit committee and SEC
• D)the auditor should proceed to issue an unqualified (clean) audit opinion

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Definitions:

Profit Margin

Profit margin is a financial metric that measures the percentage of profit a company retains after subtracting its costs from its revenue, reflecting the overall profitability of the business.

Equity Multiplier

A financial ratio indicating how much of a company's assets are financed by stockholder's equity, illustrating the degree of financial leverage used.

Times-Interest-Earned (TIE) Ratio

Determined by dividing earnings before interest and taxes by the interest charges. This ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs.

Debt Ratio

A financial ratio that measures the extent of a company’s leverage, calculated as total liabilities divided by total assets.