Which of the following statements describes why a properly designed and executed audit may not detect a material misstatement due to fraud?
A.
Audit procedures that are effective for detecting an unintentional misstatement may be ineffective for an intentional misstatement that is concealed through collusion.
B.
An audit is designed to provide reasonable assurance of detecting material errors, but there is no similar responsibility concerning material misstatement due to fraud.
C.
The factors considered in assessing control risk indicated an increased risk of intentional misstatements, but only a low risk of unintentional errors in the financial statements.
D.
The auditor didn't consider factors influencing audit risk for account balances that have effects pervasive to financial statements taken whole.
Suggested Answer:A🗳️
Choice "A" is correct. A properly designed and executed audit may not detect a material misstatement that is concealed through collusion. The auditor's responsibility is to design audit procedures that can reasonably be expected to detect material misstatements (errors and fraud) in the financial statements. Intentional misstatements that are concealed through collusion, however, are very difficult to detect, and generally the auditor is not responsible to discover them. Choice "B" is incorrect. An audit is designed to provide reasonable assurance of detecting material misstatements (both errors and fraud). Choice "C" is incorrect. If the factors considered in assessing control risk indicated an increased risk of intentional misstatements, a properly designed and executed audit would have taken the increased risk into consideration with additional audit procedures. Choice "D" is incorrect. In a properly designed and executed audit, the auditor would consider factors influencing audit risk for account balances that have effects pervasive to the financial statements taken as a whole.
Currently there are no comments in this discussion, be the first to comment!
This section is not available anymore. Please use the main Exam Page.AUD Exam Questions
Log in to ExamTopics
Sign in:
Community vote distribution
A (35%)
C (25%)
B (20%)
Other
Most Voted
A voting comment increases the vote count for the chosen answer by one.
Upvoting a comment with a selected answer will also increase the vote count towards that answer by one.
So if you see a comment that you already agree with, you can upvote it instead of posting a new comment.
Comments