Which One of the Following Statements Is TRUE? in Deciding

question 83

Multiple Choice

Which one of the following statements is TRUE? In deciding on substantive tests of transactions:

• A) the materiality of the item will NOT influence the choice of procedures used.
• B) all procedures are dependent on the adequacy of the controls and the results of the tests of controls.
• C) results obtained in the prior year's audit will NOT affect the procedures used this year.
• D) some procedures are commonly employed on every audit regardless of the circumstances.

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Definitions:

States Of Nature

Alternative conditions or scenarios in decision-making, reflecting different possible outcomes that are generally outside the control of the decision maker, with their uncertainties critical in risk analysis and management.

Expected Opportunity Loss

The anticipated loss in value resulting from not choosing the best action or decision under uncertainty.

Perfect Information

A theoretical concept where all participants have access to all relevant information, making fully informed decisions possible.

Preposterior Analysis

An evaluation method used in decision theory to assess the value of collecting additional information before making a decision.