Planning an Audit of a Financial Report Requires That an Auditor

question 16

Multiple Choice

Planning an audit of a financial report requires that an auditor plan their audit to reduce audit risk to an acceptable low level. Audit risk can be defined as;

• A) The risk that the auditor does identify the material misstatements
• B) The risk that the auditor expresses and inappropriate opinion at the conclusion of the audit
• C) That fraud exists in the accounts and the client is aware that the fraud exists
• D) That sufficient appropriate evidence cannot be gathered to form an opinion of the truthfulness of the financial statements

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Definitions:

Operating Segments

Components of an enterprise about which separate financial information is available and evaluated regularly by the chief operating decision-maker in deciding how to allocate resources.

Revenue Test

A criterion used to gauge the amount of revenue generated by a company, project, or product, crucial for decision-making and financial analysis.

Operating Segments

Components of a business that engage in business activities from which it may earn revenues and incur expenses, often reported in financial statements for diversified companies.

LIFO Method

"Last In, First Out," an inventory valuation method where the most recently purchased items are the first to be sold, affecting the cost of goods sold and inventory valuation.