When an Error or Exception Is Identified During Substantive Testing

question 27

Multiple Choice

When an error or exception is identified during substantive testing, the first response is to:

• A) qualify the audit report.
• B) understand why the error or exception has arisen.
• C) increase the sample size.
• D) report the error or exception to the audit committee.

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Definitions:

Partnership Exists

A business arrangement where two or more persons agree to share in all assets, profits, and financial and legal liabilities of a venture.

Joint Interest

A shared ownership interest among parties, typically in business contexts or real property, where all parties share in the profits, losses, and responsibilities.

Operational Management

The administration of business practices to create the highest level of efficiency possible within an organization, focusing on converting materials and labor into goods and services.

Personal Debts

Financial obligations for which an individual is personally responsible, as opposed to debts of a corporation or business entity.