The Existence of Audit Risk Is Recognized by the Statement

question 33

Multiple Choice

The existence of audit risk is recognized by the statement in the auditor's standard report that the auditor

• A)Obtains reasonable assurance about whether the financial statements are free of material misstatement.
• B)Assesses the accounting principles used and also evaluates the overall financial statement presentation.
• C)Realizes some matters, either individually or in the aggregate, are important while other matters are not important.
• D)Is responsible for expressing an opinion on the financial statements, which are the responsibility of management.

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Definitions:

Straight-line Depreciation

A method for dispersing the cost of a physical asset across its useful life in even annual allocations.

Discounted Payback

A capital budgeting method used to determine the profitability of an investment by calculating the time it takes for the present value of cash flows to cover the initial investment cost.

Annual Cash Flows

The total amount of money being transferred in and out of a business, considered on a yearly basis.

Required Rate

The minimum return an investor expects to achieve on an investment, considering its risk, also known as the hurdle rate or the required rate of return.