Which of the following characteristics of the client's management affects the risk of material misstatements in the financial report?
A) Ability to respond to risk
B) Philosophy and operating style
C) Ability to identify risk
D) All three of the above

Question

Quizplus · Accepted Answer

All three characteristics of the client's management - ability to respond to risk, philosophy and operating style, and ability to identify risk - can affect the risk of material misstatements in the financial report. The ability to respond to risk determines how the management will react to potential risks and whether they will take appropriate actions to mitigate them. The philosophy and operating style of the management can also affect the risk of material misstatements, as their values and approach to business can impact the accuracy and completeness of the financial information. Additionally, the ability to identify risk is crucial in detecting potential issues that may affect the financial report, and a lack of this ability can result in material misstatements.

Which of the Following Characteristics of the Client's Management Affects