When Assessing the Risk of Material Misstatements in the Financial

question 48

Multiple Choice

When assessing the risk of material misstatements in the financial statements,

• A) inadequate internal control procedures will mitigate client business risk.
• B) GAAS specifies in detail how much and what types of evidence the auditor needs to obtain.
• C) company management is responsible for determining materiality levels.
• D) the auditor must understand the client's business and industry.

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Definitions:

Consistency

Consistency in data or methodologies indicates that the results or approaches remain steady and unvarying over multiple trials or instances.

Chi-squared Distribution

A statistical distribution that is used to describe the distribution of the sum of the squares of independent, standard normal variables.

Critical Value

The threshold value that a test statistic must exceed for the null hypothesis to be rejected in hypothesis testing.

Degrees Of Freedom

The number of independent values in a statistical calculation that are free to vary when estimating parameters.