The Possibility That a Material Error Will Occur Even Though

question 74

Multiple Choice

The possibility that a material error will occur even though auditors are following audit procedures and using good judgment is referred to as

• A)control risk.
• B)detection risk.
• C)inherent risk.
• D)investigating risk.

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Definitions:

Future Cash Flows

Projections of the amount of money that is expected to be generated by an investment in the future.

Financial Assets

Assets that derive value from a contractual claim, such as bank deposits, stocks, bonds, and derivatives.

Real Asset

Physical or tangible assets such as real estate, commodities, and natural resources that have intrinsic value.

Bonds

Fixed-income investments where an investor loans money to an entity (corporate or governmental) which borrows the funds for a defined period of time at a fixed interest rate.