The significance of cash to the entity's liquidity and the fact that the balance is relatively small mean that the acceptable level of detection risk in verifying cash balancis invariably set as low.

Question

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Cash is a critical component of an entity's liquidity and a relatively small balance can have a significant impact on overall financial health. As a result, auditors typically set a low level of detection risk when verifying cash balances to ensure that any errors or misstatements are detected.

The Significance of Cash to the Entity's Liquidity and the Fact