When Discussing Acceptable Audit Risk (AAR) and the Audit Risk

question 82

Multiple Choice

When discussing acceptable audit risk (AAR) and the audit risk model, which one of the following statements is true?

• A) AAR is objectively determined by the auditor.
• B) The terms audit assurance, overall assurance or level of assurance are synonyms for AAR.
• C) When the auditor decides on a lower acceptable audit risk, it means the auditor wants to be more certain that the financial statements are not materially misstated.
• D) AAR is the risk that the auditor is willing to take that the financial statements are fairly stated after the audit is completed and an unqualified opinion has been reached.

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Definitions:

Ethical Decision Making

The process of evaluating and choosing among alternatives in a manner consistent with ethical principles.

Conflicts Of Interest

Situations where an individual’s or group’s personal interests potentially interfere with their responsibilities or the interests of others.

Confirmation Bias

The bias towards finding, interpreting, prioritizing, and reminiscing on details in a manner that affirms and supports one's prior beliefs or assumptions.

Groupthink

this is a psychological phenomenon that occurs within a group of people, where the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome.