When an Auditor Increases the Assessed Level of Control Risk

question 435

Multiple Choice

When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor most likely would increase the:

• A) Level of detection risk.
• B) Extent of tests of details.
• C) Level of inherent risk.
• D) Extent of tests of controls.

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Definitions:

Work in Process

Inventory that includes goods partially completed but not yet ready for sale.

Predetermined Overhead Rate

The rate used to allocate estimated overhead costs to products or job orders, based on a preselected activity base.

Direct Labor Cost

The total expense that a company incurs for the labor directly involved in the manufacture of a product.

Work in Process

Goods partially completed during the manufacturing process; they are not yet finished products.