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:

Passive Listening

The act of hearing someone speak without actively engaging, giving feedback, or demonstrating understanding.

Sincere

The quality of being genuine, honest, and free from pretense or deceit in one's actions and words.

Interpersonal Communications

Interpersonal communications involve the exchange of information, feelings, and meanings between two or more people through verbal and/or non-verbal methods.

Openness

indicates a willingness to receive new ideas and experiences, often linked to creativity and adaptability.