Once the Auditor Has Obtained an Understanding of the Inherent

question 5

True/False

Once the auditor has obtained an understanding of the inherent and fraud risks of material misstatement associated with debt and stockholders' equity transactions,the auditor needs to understand the controls that the client has designed and implemented to address those risks.

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Definitions:

Contractual Capacity

The legal ability of an individual or entity to enter into a contract, requiring an understanding of the terms and the ability to comprehend its obligations.

Promissory Estoppel

A doctrine under which a promise is binding if the promise is clear and definite, the promisee justifiably relies on the promise, the reliance is reasonable and substantial, and justice will be better served by enforcing the promise.

Consideration

A fundamental concept in contract law that involves something of value exchanged between parties as part of an agreement.

Legality

The state or condition of being in accordance with the law.