If an Entity's External Auditor Expresses an Unmodified Opinion as a Result

question 7

Multiple Choice

If an entity's external auditor expresses an unmodified opinion as a result of the audit of the entity's financial report, readers of the auditor's report can assume that:

• A)the entity is financially sound and the financial report is accurate.
• B)the external auditor found no irregularities.
• C)all material disagreements between the entity and the external auditor about the application of accounting principles were resolved to the satisfaction of the auditor.
• D)the internal control structure is effective.

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Definitions:

Security Selection

The process of choosing individual securities for investment, based on the analysis of their potential for return relative to their risk.

Asset Class

A category of investment with similar characteristics, typically including stocks, bonds, real estate, and commodities.

Market Portfolio

A theoretical bundle of investments that contains all types of assets available in the market, with each asset weighted by its market capitalization.

Passive Portfolio Management

An investment strategy that seeks to replicate and hold a market index or benchmarks, minimizing buying and selling to reduce costs.