When the Auditor Is Considering the Risk of Material Misstatement

question 32

Multiple Choice

When the auditor is considering the risk of material misstatement, they will attempt to identify major risks, determine how these risks could relate to fraud or error, consider the importance of the risks, and ______.

• A)notify management of these risks
• B)attempt to immediately resolve any identified risks
• C)determine the probability that the identified risks might result in material misstatements
• D)determine who is responsible for each identified risk

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Definitions:

Physical Units

A measure of quantity in production or inventory, typically referred to when counting tangible products or items.

Finished Goods Inventory

A category of inventory that includes items that are ready for sale, having completed all stages of production.

Production Activities

Production activities refer to the processes involved in creating goods or services, including manufacturing, assembly, and quality control.

Predetermined Overhead Rate

An estimated charge per unit of activity used to allocate manufacturing overhead costs to products.