You Generally Consider Your Audit Client's Management to Be Honest

question 50

Multiple Choice

You generally consider your audit client's management to be honest.However,they do have a bias towards wanting to understate their income to lower income taxes.How would this bias be implemented in the audit risk model?

• A)reduce acceptable audit risk and reduce inherent risk
• B)increase acceptable audit risk and reduce inherent risk
• C)reduce acceptable audit risk and increase inherent risk
• D)increase acceptable audit risk and increase inherent risk

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Definitions:

Computerized System

An electronic system that uses computers and software to manage, control, or perform a task or process.

Manual System

A system where operations, transactions or processes are carried out without the use of automated or electronic systems, typically involving physical documentation and human intervention.

Internal Controls

Processes and procedures implemented by a company to safeguard its assets, ensure financial report accuracy, and promote operational efficiency.

Current Balances

The total amount present in an account at any given time, reflecting all transactions up to that point.