The Auditor Should Assess the Risk That Errors and Fraud

question 29

Multiple Choice

The auditor should assess the risk that errors and fraud may cause the financial report to be materially misstated and, based on that assessment:

• A)design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial report.
• B)plan the audit to search for errors or fraud that could be material to the financial report.
• C)perform the audit on the basis that errors or fraud are likely to cause a material misstatement of the financial report.
• D)apply substantive tests to detect material misstatements except those perpetrated by means of forgery or collusion.

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Definitions:

Proximal Stimulus

The stimulus registered by the sensory receptors, for example, the pattern of light that hits the retina.

Immune System

The body's defense mechanism against pathogens, comprising various organs, tissues, and cells.

Grass Pollen

Microscopic grains released by grasses for the purpose of fertilization, often a common allergen for many people.

Allergen

A substance that can cause an allergic reaction in individuals who are sensitive to it, ranging from mild to severe responses.