Auditors will need to perform more substantive tests than normal to obtain sufficient appropriate evidence that a financial instrument is fairly stated if which of the following conditions exist?

Question

Quizplus · Accepted Answer

When management's key assumptions are subject to volatility, there is a higher risk that the financial instrument may not be fairly stated. Therefore, auditors will need to perform more substantive tests to obtain sufficient appropriate evidence. Option A is incorrect because it indicates that management is objective and transparent, which would reduce the risks associated with financial instruments. Option C is incorrect because if the stocks are issued by Fortune 100 firms traded in an active market, there is a lower risk of misstatement. Option D is incorrect because it assumes that there are no control weaknesses in the valuation process, which may not be true.

Auditors Will Need to Perform More Substantive Tests Than Normal