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The Term "Audit Failure" Refers to the Situation When the Auditor

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The term "audit failure" refers to the situation when the auditor has followed auditing standards yet still fails to discover that the client's financial statements are materially misstated.


Definitions:

Durbin-Watson Statistic

A test statistic used to detect the presence of autocorrelation in the residuals from a regression analysis.

Autocorrelation

The statistical relationship of a variable with itself over successive time intervals, often used in time series analysis to identify repeating patterns or seasonal effects.

Heteroscedastic

A characteristic of a dataset where the variability of a variable is unequal across the range of values of a second variable that predicts it.

Variability

The extent to which data points in a statistical distribution or data set diverge from the average or mean.

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