When Considering the Risk of Misstatement Due to Fraud

question 65

Multiple Choice

When considering the risk of misstatement due to fraud,

• A)the risk of not detecting a material misstatement due to fraud is lower than the risk of not detecting a misstatement due to error.
• B)the risk is only made at the financial statement level.
• C)auditing standards require the auditor to presume that risk of fraud exist in expense transactions.
• D)auditing standards outline procedures the auditor should perform to obtain information from management about their consideration of fraud.

---

Definitions:

Long Run

A period of time in which all factors of production and costs are variable, allowing for full adjustment to changes.

Profit-Maximizing Firms

Businesses that operate with the primary goal of maximizing their profit, which is achieved by increasing income while minimizing costs.

Economic Factors

The various external factors, such as inflation, interest rates, and unemployment, that influence the performance of the economy.

Cattle Ranchers

Individuals or businesses engaged in the raising and breeding of cattle for meat or milk production.