If the Auditor Determines That Internal Controls Are Not Functioning

question 47

Multiple Choice

If the auditor determines that internal controls are not functioning as designed, and a compensating control does not exist, the auditor will assess control risk and the risk of material misstatement (RMM) as_______.

• A)high and set detection risk as low
• B)low and set detection risk as low
• C)high and set detection risk as high
• D)low and set detection risk as high

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Definitions:

Dutch Auction

An auction model where the price of the item is lowered until it finds a buyer, commonly used for selling financial securities.

Shares

Equities in a corporation or financial asset, these units grant holders a proportional claim on profits via dividends, should they be distributed.

Rights Offering

An economic arrangement allowing existing stockholders the opportunity to buy more shares ahead of the general public, frequently at a reduced price.