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:

Statistical Forecasting

The process of using statistical methods to predict future events or trends based on historical data.

Malicious Compliance

The act of intentionally following orders or instructions in a way that is known to cause harm or failure, using adherence to the directives as a form of passive aggression.

Organizational Change

The process by which companies or organizations change their structure, strategies, operational methods, technologies, or organizational culture to affect change within the organization or to respond to external influences.

Cost-Cutting Strategy

A business approach aimed at reducing expenses to improve overall profitability without compromising the quality of products or services.