If Planned Detection Risk Is Reduced, the Amount of Evidence

question 55

Multiple Choice

If planned detection risk is reduced, the amount of evidence the auditor accumulates will:

• A) increase.
• B) decrease.
• C) be indeterminate.
• D) remain unchanged.

Comprehend the role and application of blue-sky laws in securities regulation.

Understand the key legislative acts regulating corporate securities and their issuing companies.

Recognize the oversight mechanisms established to regulate public accounting firms and to ensure transparency and accountability.

Identify the main functions and purposes of significant securities-related laws like the Sarbanes-Oxley Act of 2002.

---

Definitions:

Monthly Net Operating Income

The profit a company generates from its normal business operations, excluding unusual or infrequent items, on a monthly basis.

Margin of Safety

Margin of Safety is the difference between actual or expected sales and the break-even point, expressed in terms of units, dollars, or percentage, indicating how much sales can fall before a business incurs a loss.

Contribution Margin Ratio

A financial metric that measures how much of a company's revenue is available to cover its variable costs and contribute to its fixed costs and profits.

Fixed Costs

Expenses that do not change with the level of goods or services produced by the business, such as rent, salaries, and insurance premiums.