The Auditor Set Acceptable Audit Risk at 5%,inherent Risk at 100%,and

question 28

Multiple Choice

The auditor set acceptable audit risk at 5%,inherent risk at 100%,and control risk at 50%,and determined a detection risk of 10%.If control risk had been 80%,detection risk would be about

• A)16%.
• B)10%.
• C)6%.
• D)5%.

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Definitions:

Divisional Beta

A measurement of the risk associated with a particular division of a company, relative to the overall market.

Accounting Beta

A measure of the sensitivity of a company's operating income to changes in the economy or its sector, used for risk assessment in strategic planning.

Beta

The measure of market risk in portfolio theory. The degree to which a stock’s return moves with the market’s return.

Cost of Capital

The vital rate of earnings a company must generate from its investment plans to preserve its standing in the market and appeal for investments.