Auditors Will Need to Perform More Substantive Tests Than Normal

question 15

Multiple Choice

Auditors will need to perform more substantive tests than normal to obtain sufficient appropriate evidence that a financial instrument is fairly stated if which of the following conditions exist?

• A)Management is objective and transparent in their assumptions.
• B)Management's key assumptions are subject to volatility.
• C)The entity's portfolio is composed of only stocks issued by Fortune 100 firms traded in an active market.
• D)The entity does not have control weaknesses in its valuation processes.

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Definitions:

Inelastic Demand

A market condition in which the demand for a product does not significantly change in response to a change in its price.

Less Elastic Demand

A situation where the demand for a product or service is relatively unresponsive to changes in price.

Economic Profits

The difference between total revenues and total costs, including both explicit and implicit costs, signaling the overall profitability from an economic standpoint.

Perfectly Inelastic

A situation in economics where the quantity demanded or supplied does not change in response to changes in price.