[Anonymous]

NINJA Question –

Question: What section and paragraph of the AICPA’s Codification of Statements on Auditing Standards (clarified standards) state that misstatements in the financial statements can arise from either fraud or error?

So when items are addressed/defined in more than one section of the AL do they give credit for either.

Answer per Ninja is: AU-C 240.02 discusses misstatements in the financial statements that can arise from either fraud or error.

But this is also correct 450.A01 (below), but the first place it’s mentioned is 450.04

Misstatement (Ref: par. .04)

.A1

Misstatements may result from fraud or error, such as

a

. an inaccuracy in gathering or processing data from which the

financial statements are prepared,

b

. an omission of an amount or disclosure,

c

. a financial statement disclosure that is not presented in accor-

dance with the applicable financial reporting framework,

d

. an incorrect accounting estimate arising from overlooking or clear

misinterpretation of facts, and

e

. judgments of management concerning accounting estimates that

the auditor considers unreasonable or the selection or application

of accounting policies that the auditor considers inappropriate.

[monikernc]

Post the question as it is in the sim.

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[Anonymous]

That is exactly how the sim is worded.

[monikernc]

AU-C 240 is about fraud and 240.02 is the actual standard. it makes the statement you are looking for and goes further to distinguish the difference between error and fraud.
where you found it in 450 are definitions of misstatement not a standard dedicated to error and fraud per se.
i bet the only best, right answer is 240.02 – as for credit for the others i think it is doubtful – the definitions in 450 are about misstatement.
i hope this helps.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Anonymous]

Hey thanks for the reply. I'm still confused, which is what worries me because these research questions are practically give aways. Anwyay….

AUC-240 Is about Considering fraud in a FS Audit.

AUC- 450 is “Evaluating misstatements identified during the audit.”

I don't see that the question is worded in such a way that I would think “this is pointing toward fraud”

.”What section and paragraph of the AICPA's Codification of Statements on Auditing Standards (clarified standards) state that misstatements in the financial statements can arise from either fraud or error?”

That's why I went for the 450, because the question is referring to both sources of misstatement.

[Author]

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