An Important Role of Inherent Risk Assessment During the Audit

question 47

Multiple Choice

An important role of inherent risk assessment during the audit process is the need to

• A)document the quality of the disaster recovery plan.
• B)attempt to predict where misstatements are most and least likely in the financial statement segments.
• C)train the audit staff to assess the integrity of management.
• D)increase the level of analytical review.

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Definitions:

Excess Fair Value

The amount by which the fair value of an asset exceeds its carrying value on the balance sheet, often recognized in business combinations or asset revaluations.

Franchise Contract

A legal agreement granting an individual or group the rights to market a company’s products or services in a specific territory.

Consolidated Net Income

The total net income of a parent company and its subsidiaries, after inter-company transactions have been eliminated.

Noncontrolling Interests

A portion of equity in a subsidiary not held by the parent company, representing the minority ownership's share of the subsidiary's net assets and income.