Not All Misstatements Will Be Material Enough to Affect the Fair

question 3

Multiple Choice

Not all misstatements will be material enough to affect the fair presentation of the financial statement. A material misstatement is one that the auditors determine would change or influence the option of a reasonable person relying on the financial statements for information. Ultimately, auditors must exercise judgment to assess materiality based on the qualitative nature of the misstatements and their quantitative extent. Materiality is also based on auditors' assessment of control risk levels in the organization. The following factors may influence the auditors' assessment of control risk EXCEPT:

• A) Management's awareness or lack of awareness of applicable laws and regulations
• B) Client policy regarding such matters as acceptable operating practices and codes of conduct
• C) Assignment of responsibility and delegation of authority to deal with such matters as organizational goals and objectives, operating functions, and regulatory requirements
• D) None of these

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Definitions:

Nondeclarative Memories

Nondeclarative memories involve knowledge or skills one can express through performance rather than conscious recollection, such as riding a bike or playing an instrument.

Declarative Memories

Recollections accessible to our conscious mind, comprising knowledge and events.

Semantic Memory

Semantic memory refers to a portion of long-term memory that processes ideas and concepts that are not drawn from personal experience, such as facts, meanings of words, and general knowledge of the world.

Declarative Memories

Recollections that are accessible to conscious awareness, including information and occurrences.