A Purpose of a Management Representation Letter Is to Reduce

question 212

Multiple Choice

A purpose of a management representation letter is to reduce:

• A) Audit risk to an aggregate level of misstatement that could be considered material.
• B) An auditor's responsibility to detect material misstatements only to the extent that the letter is relied on.
• C) The possibility of a misunderstanding concerning management's responsibility for the financial statements.
• D) The scope of an auditor's procedures concerning related party transactions and subsequent events.

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Definitions:

Incompatible Biases

Prejudices or preconceived opinions that conflict with each other or with current situations.

Internal Attributions

The process of explaining someone's behavior based on internal characteristics such as personality, disposition, or attitude.

External Attributions

The process of assigning the cause of an individual's behavior to factors outside the person, such as the social situation or environmental factors.

Poor Performance

The occurrence of failing to meet minimum accepted standards or objectives within professional or personal tasks.