Auditing Standards Define ________ as the Magnitude of Misstatements That

question 131

Multiple Choice

Auditing standards define ________ as the magnitude of misstatements that individually, or when aggregated with other misstatements, could reasonably be expected to influence the economic decisions of users made on the basis of the financial statements.

• A) fraud
• B) inherent risk
• C) materiality
• D) significant

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Definitions:

FA/Sales Ratio

Fixed Assets to Sales Ratio; measures the efficiency of a firm's use of its fixed assets to generate sales.

Financial Forecast

A prediction of future revenues, expenses, and profits of a company, used for budgeting and strategic planning.

Fixed Assets

Assets that are purchased for long-term use and are not likely to be converted quickly into cash, such as buildings, land, and machinery.

Pro Forma Financial Statements

Financial statements that project the financial position of a company, based on certain assumptions and typically used for future planning.