The Concept of Reasonable Assurance in the Context of an Entity's

question 10

Multiple Choice

The concept of reasonable assurance in the context of an entity's internal controls recognizes that

• A) Auditors may fail to detect material misstatements.
• B) Proper internal controls guarantee that material misstatements will not occur.
• C) Proper internal controls preclude fraud.
• D) The costs of some controls may be too high to implement in relation to potential benefits.

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Definitions:

Secret Profit

Gains obtained by an individual, often an agent or fiduciary, without the knowledge or consent of the principal or beneficiary they represent.

Duty Of Loyalty

An obligation of fiduciaries to act in the best interest of the party they owe the duty to, often in contexts such as corporate governance.

Real Estate Investment

The act of allocating financial resources into real estate properties with the expectation of generating income through rental yields or capital gains.

Authorization

Official permission or power granted to an individual or entity to carry out certain actions.