If an Auditor Believes the Client Will Have Financial Difficulties

question 29

True/False

If an auditor believes the client will have financial difficulties after the audit report is issued, and external users will be relying heavily on the financial statements, the auditor will probably set acceptable audit risk as low.

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Definitions:

Flows of Money

The movement of money between entities in an economy, including spending, investing, and financing activities.

Overstated Accounts

Financial accounts or records reported with higher values than they actually possess, often leading to a misrepresentation of financial health.

Transactions

Acts of buying, selling, or exchanging goods, services, or financial assets in the course of business.

Assets

are resources with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit.