An Auditor Determines That There Is an Inherent Risk That

question 31

Multiple Choice

An auditor determines that there is an inherent risk that a company has not included both the basic earnings per share and diluted earnings per share amounts in financial statements even though significant dilutive securities are part of the company's complex capital structure.This determination is most likely tied to which of the following management assertions?

• A)Valuation.
• B)Presentation and disclosure.
• C)Rights and obligations.
• D)Existence.

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Definitions:

Degrees of Freedom

The count of distinct values or numbers assignable to a statistical distribution.

Independence

A condition in which two or more variables are not related, meaning the behavior or value of one variable does not affect the other.

Estimated Parameters

Quantitative values derived from sample data that serve as best guesses for the parameters of the population from which the sample was drawn.

Multinomial Population

A population in statistical analysis where each member can belong to one of several or many different categories.