An Auditor Considers Two Factors in Understanding Business Risks

question 32

Multiple Choice

An auditor considers two factors in understanding business risks.They are:

• A)The likelihood of a risk occurring and the materiality of the risk.
• B)The magnitude of the risk and the type of risk.
• C)The likelihood of the risk occurring and the type of risk.
• D)The likelihood of a risk occurring and the magnitude the risk.

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Definitions:

Yield Curve

A graph showing the relationship between bond yields and maturities, commonly used to gauge future interest rate changes.

Term Structure

The relationship between the interest rates (or yields) and the maturities of debt securities such as bonds.

Interest Rates

The percentage of a sum of money charged for its use, indicating the cost of borrowing money or the return on invested funds.

Slope

In mathematics and economics, the measure of the steepness or incline of a line, often interpreted as the rate of change of one variable with respect to another.