A Properly Planned and Performed Audit May Fail to Detect

question 8

Multiple Choice

A properly planned and performed audit may fail to detect a material misstatement resulting from fraud because

• A) Audit procedures that are otherwise effective may be ineffective for fraud that is concealed through collusion.
• B) An audit is planned and performed to provide reasonable assurance of detecting material misstatements caused by errors but not by fraud.
• C) The factors considered in assessing control risk indicated an increased risk of error but only a low risk of fraud in the financial statements.
• D) The auditor did not consider factors influencing audit risk for account balances that have effects pervasive to the financial statements taken as a whole.

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Definitions:

Disposal

Refers to the process of discarding, selling, or removing an asset from the company's records.

Property, Plant and Equipment

Long-term tangible assets held for business use and not expected to be converted into cash in the upcoming fiscal year.

Land Held

Real estate owned by a person or entity, typically recorded as an asset on the balance sheet.

Corporate Headquarters

The main office or central administration location of a company where key managerial functions are coordinated.