The Auditing Standards Have Listed Several Circumstances That Might Cause

question 12

Multiple Choice

The auditing standards have listed several circumstances that might cause quantitatively immaterial misstatements to be judged material.These include

• A)misstatements that change income into a loss
• B)the effect of the misstatement on loan covenants,contractual agreements and regulatory provisions
• C)the existence of statutory or regulatory reporting requirements that might have an impact on materiality levels
• D)misstatements that have the effect of increasing management's compensation
• E)the effect of misclassifying income between operating and nonrecurring
• F)both A and B
• G)both C and D
• H)both D and E

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Definitions:

Mood Disorders

A category of psychiatric disorders characterized by the disturbance of a person's mood, leading to periods of depression or elevated mood.

Imagined Loss

Freudian theory that the individual unconsciously interprets all types of loss events (e.g., job loss) in terms of grief, thereby raising the risk for depression.

Magnification / Catastrophizing

The cognitive distortion that involves seeing a situation as far worse than it actually is, often leading to heightened anxiety or stress.

Hypomanic Episode

A period characterized by a persistently elevated, expansive, or irritable mood that is distinctly different from the individual’s usual non-depressed mood and lasts at least four days.