Because of the Risk of Material Misstatement,an Audit of Financial

question 46

Multiple Choice

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

• A) Objective judgment.
• B) Independent integrity.
• C) Professional skepticism.
• D) Impartial conservatism.

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Definitions:

Equity Method

An accounting technique used by firms to assess the profits earned by their investments in other companies, by recording profits proportional to their ownership percentage.

Inventory

Assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in rendering services.

Journal Entry

A record in accounting that notes the debit and credit transactions affecting the financial statements of a business.

Significant Influence

A concept in accounting and finance where an investor has the power to participate in, but not control, the financial and operating policy decisions of an investee.