When assessing the risk of material misstatement, auditors evaluate the reasonableness of an entity's accounting estimates. An auditor normally would be concerned about assumptions that are:
A)susceptible to bias.
B)consistent with prior periods.
C)insensitive to variations.
D)similar to industry guidelines.

Question

Quizplus · Accepted Answer

Assumptions that are susceptible to bias are a concern for auditors because they can lead to overstatement or understatement of account balances. Auditors need to evaluate the reasonableness of these assumptions to reduce the risk of material misstatement. Choices B and D may be important factors to consider, but they do not address the primary concern of bias. Choice C is not a desirable attribute because insensitive assumptions may not reflect the entity's actual financial results.

When Assessing the Risk of Material Misstatement, Auditors Evaluate the Reasonableness