Chap 1 Notes_Part_7

Chap 1 Notes_Part_7 - improving accuracy and reducing bias...

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Comparison with other Professions Doctor Lawyer Auditor Patient Client Client Germ Opponent Public
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Value of an Audit Enhance Credibility of Clients’ Financial Statements Reality: P(material misstatement (MM)) > 0; P(Detecting MM|MM) < 1 Audit Value = P(Reporting MM|Detected MM)*P(Detecting MM)>0 P(Detecting MM|MM) = f(competence, work effort, nature of subject matter, shrewdness) P(Reporting MM|Detected MM) = f(independence)
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Value of an Audit enhance credibility of clients’ financial statements by
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Unformatted text preview: improving accuracy and reducing bias detect and deter fraud managements need for reliable information provide insurance contracts based on accounting numbers stewardship management's ability to use assets to generate profits Managements ability to maintain asset base satisfy SEC, PCAOB, and stock exchanges consulting, tax, IC evaluation, systems evaluation...
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Chap 1 Notes_Part_7 - improving accuracy and reducing bias...

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