Professional Judgment Is a Widely Used Concept in Accounting and Auditing.How

question 12

Multiple Choice

Professional judgment is a widely used concept in accounting and auditing.How is it defined in the audit standards?

• A)There is no definition of professional judgment in the auditing standards.
• B)Professional judgment includes consideration of key principles and concepts of disciplines underlying the professional standards, such as economics, psychology, law, finance, statistics and philosophy.
• C)Professional judgement means reaching a complex decision by incorporating auditing standards, accounting standards, and rules of professional ethics in a coherent manner.
• D)Professional judgement involves specialized concepts and language integrating several disciplines in order to provide appropriate justification for audit decisions.

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Definitions:

Market Risk

The risk of losses in investments due to factors that affect the overall performance of the financial markets.

Rates of Return

The net gain or loss of an investment over a specified time period, expressed as a percentage of the investment’s initial cost.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, considering the time value of money.

Speculative Bubbles

A situation in which prices for securities, especially stocks, rise far above their actual value based on expectations of further rises, typically followed by a sharp decline in prices.