When a Client Fails to Follow GAAP, the Audit Report

question 5

Multiple Choice

When a client fails to follow GAAP, the audit report can be unqualified, qualified, or adverse depending on the materiality.What factors affect materiality that an auditor should consider?

• A)The dollar amount in comparison to a base
• B)If the misstatement can be measured
• C)The nature of the item
• D)All the above are factors an auditor should consider regarding materiality.

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Definitions:

Expectation

A belief or anticipation about the future, shaping one's perception of upcoming events or outcomes.

Social Traps

Situations where individuals or groups are unable to escape adverse conditions due to conflicting interests.

Drought

An extended period of deficient precipitation resulting in water scarcity that affects ecosystems, agriculture, and water supply.

Water Reserves

Stored or available water in natural or artificial reservoirs that can be used for various purposes.