An Organization's Accounts Payable Function Improved Its Internal Controls Significantly

question 393

Multiple Choice

An organization's accounts payable function improved its internal controls significantly after it received an unsatisfactory audit report. When planning a follow-up audit of the function, what level of detection risk should be expected if the audit and sampling procedures used are unchanged from the prior audit?

• A) Detection risk is lower because control risk is lower.
• B) Detection risk is lower because control risk is higher.
• C) Detection risk is higher because control risk is lower.
• D) Detection risk is unchanged although control risk is lower.

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Definitions:

Accounts Payable

Short-term liabilities of a company, representing amounts owed to suppliers or creditors for goods and services received but not yet paid for.

Office Supplies

Consumable items used in offices on a regular basis, such as paper, pens, and toner cartridges.

Cash Dividends

Dividends paid out in cash by a company from its earnings to its shareholders at declared dividend dates.

Utility Bill

A statement of charges for the consumption of utilities such as electricity, gas, water, or sewage.