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CMA Intermediate · Corporate Accounting and Auditing · Brief Introduction to Auditing Standards

The applicable financial reporting framework encompasses several sources, and conflicts arise between the framework and the other sources giving direction on its application. Under SA 200, how is the conflict resolved?

The source with the highest authority prevails. SA 200 provides this rule where conflicts exist between the financial reporting framework and other sources giving direction on its application, or among the sources that make up the framework, regardless of recency or prevalent practice.

  1. AThe source issued most recently prevails
  2. BThe source reflecting general and industry practice widely prevalent prevails
  3. CThe source with the highest authority prevailsCorrect
  4. DThe auditor chooses the source that gives the more conservative result

Explanation

SA 200 states that where conflicts exist between the framework and the sources giving direction on its application, or among the sources that make up the framework, the source with the highest authority prevails. Recency, prevalence of practice and conservatism are not the stated tests. General and industry practices are only one of the listed other sources.

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