While Performing a Substantive Test of Details During an Audit

question 28

Multiple Choice

While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was not materially misstated. It was, in fact, materially misstated. This situation illustrates the risk of

• A) incorrect rejection.
• B) incorrect acceptance.
• C) assessing control risk too low.
• D) assessing control risk too high.

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Definitions:

Intentional Deception

The act of deliberately misleading or lying to others, potentially to gain an advantage or hide information.

Unfair Economic Advantage

A situation where a business or country gains a superior position in the market or economy through unethical, illegal, or inequitable practices.

Accounting Fraud

Deliberate manipulation or falsification of financial records and statements to give a misleading view of a company's financial health.

Bond Ratings Agencies

Organizations that assess the creditworthiness of both sovereign and corporate issuers of debt securities, providing investors with information on the risk level of their investments.