A Properly Planned and Performed Audit May Fail to Detect

question 55

Multiple Choice

A properly planned and performed audit may fail to detect a material misstatement resulting from fraud because:

• A)audit procedures that are otherwise effective may be ineffective for fraud that is concealed through collusion.
• B)an audit is planned and performed to provide reasonable assurance of detecting material misstatements caused by errors but not by fraud.
• C)the factors considered in assessing control risk indicated an increased risk of error but only a low risk of fraud in the financial statements.
• D)the auditor did not consider factors influencing audit risk for account balances that have effects pervasive to the financial statements taken as a whole.

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Definitions:

Mental Abilities

The range of cognitive functions including memory, perception, problem-solving, and intellectual skills.

Practical Intelligence

Refers to the ability to solve everyday problems by utilizing knowledge gained from experience, as opposed to theoretical or abstract knowledge.

Solutions

Homogeneous mixtures composed of two or more substances in which the molecules are evenly distributed.

Sternberg

Refers to Robert Sternberg, a psychologist known for his triarchic theory of intelligence, which includes analytical, creative, and practical dimensions.