When There Is a Significant Risk That an Account Will

question 9

Multiple Choice

When there is a significant risk that an account will be misstated and the client's system of internal controls is not considered effective at reducing that risk:

• A)more high quality evidence is gathered when conducting substantive tests
• B)detection risk is set as low
• C)detection risk is set as high
• D)none of the above

Comprehend the role and requirements of the Sarbanes-Oxley Act concerning internal controls and auditor's reports.

Understand the importance of comparing financial data across different periods and with other companies for comprehensive performance analysis.

Recognize the importance and limitations of earnings per share (EPS) as an indicator of company performance.

Grasp the significance of the auditor's report and the different types of audit opinions.

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Definitions:

Coefficient Of Determination

A statistical measure that indicates the proportion of the variance in the dependent variable predictable from the independent variable(s).

Standard Error

A statistical measure that estimates the accuracy of a sample mean by quantifying the dispersion of sample means around the population mean.

Regression Model

A statistical technique used to analyze the relationship between a dependent variable and one or more independent variables.

Prediction Intervals

Ranges within which future values are expected to fall with a specified probability, based on a model or data.