The role of management's intent increases the risk of material misstatement re: the Existence assertion for financial investments
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The role of management's intent increases the risk of material misstatement re: the Existence assertion for financial investments.
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- The value of an investment can be defined in numerous ways. Which is FALSE? a. It is the value determined by demand and supply. b. It is an objective estimate wherein the risk preference of the investor is considered. c. It is the present value of the cashflows on the investment d. It is dependent on the perceptions of the investor.are there methodologies by which the investor can bring to bear against adverse investment decision - making due to the influence of personality in investor ‘s risk toleranceIf the auditors discover that the carrying amount of a client’s investments is overstated because of a loss in value that is other than a temporary decline in market value, they should insist thata. The approximate market value of the investments be shown in parentheses on the face of the balance sheet.b. The investments be classified as long term for balance-sheet purposes with full disclosure in the footnotes.c. The loss in value be recognized in the financial statements.d. The equity section of the balance sheet separately show a charge equal to the amount of the loss.
- The risk to investors that a company’s financial statements may be materially misleading is calleda. Client acceptance risk.b. Information risk.c. Moral hazard.d. Business risk.In performing risk assessment procedures for investments, an auditor may inquire of the client personnel which of the following questions? Group of answer choices 4. All of the choices 1. Is investment income independently recalculated? 2. Are investment records periodically reconciled to actual listing of investments (i.e., per count or investment custodian statement)? 3.Is there independent review of investments measured at fair value based on market valuation?TRUE OR FALSE Financial sector creates products for the management of risk, thus risk can be abolished fully.
- During your testing of controls over investments. You have noted that the acquisitionand disposals were approved by people coming from the accounting department.Which control is most likely violated? choices: Controls over incompatible dutiesControls over reporting of investmentsControls over the custody of investmentsNone of the choices.Describe some of the motives and mistakes made by the investors?Something is deemed to be 'material' if its omission, non-disclosure or misstatement is likely to affect economic decisions or other evaluations made by users entitled to rely on the financial statements. Select one alternative: True False
- Do you think the concept of materiality is incompatible with ethical behavior? Consider in your answer how materiality judgments affect risk assessment in an audit of financial statements.Funding risk is the risk that a firm will not be able to meet its short-term financial obligations when due. Select one: True FalseWhich of the following statements is false? A. Internal controls are the processes by which the firm ensures that it presents accurate financial statements. B. Greenfield investments provide uncertain cash flows with high yields and high growth potential. C. Footnotes allow investors or any users to improve their assessments of the amount, timing, and uncertainty of the estimates reported in financial statements. D. Secondary markets are the markets in which existing, already outstanding securities are traded among investors.