An Auditor Is Required to Establish an Understanding with a Client

question 74

Multiple Choice

An auditor is required to establish an understanding with a client regarding the services to be performed for each engagement. This understanding generally includes:

• A) The auditor's responsibility for determining the preliminary judgments about materiality and audit risk factors.
• B) Management's responsibility for identifying mitigating factors when the auditor has doubt about the entity's ability to continue as a going concern.
• C) The auditor's responsibility for ensuring that those charged with governance are aware of any significant deficiencies in internal control that come to the auditor's attention.
• D) Management's responsibility for providing the auditor with an assessment of the risk of material misstatement due to fraud.

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Definitions:

Short-Run Time Periods

A term commonly used in economics and business planning to describe a timeframe in which the reactions or responses to decision-making are observed.

Independent variables

Variables in research that are manipulated or chosen by the researcher to determine their effects on dependent variables.

Dependent Variables

In research, variables whose variation is dependent on that of other variables, commonly used to measure the effect of independent variables.

Long-Run Time Periods

Extended durations during which all factors of production and costs are variable, allowing businesses to make adjustments to achieve optimal production levels.