The Risk of Material Misstatement Due to Fraud Relating to Revenue

question 11

Multiple Choice

The risk of material misstatement due to fraud relating to revenue recognition should be

• A)approached in a manner that is identical to control risk assessment.
• B)given lower priority to the risk of embezzlement.
• C)ordinarily presumed by the auditor.
• D)assumed to have been considered by the FASB.

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Definitions:

Short Position

A trading strategy where an investor sells a security they do not own, speculating that its price will decline, allowing them to buy it back at a lower price for a profit.

Profit

The financial gain realized when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Financial Futures Contracts

Agreements to buy or sell a financial instrument at a future date for a price agreed upon today.

DAX 30 Index

A stock market index that represents 30 of the largest and most liquid German companies trading on the Frankfurt Stock Exchange.