A Quantitative Risk Assessment Model Has All of the Following

question 307

Multiple Choice

A quantitative risk assessment model has all of the following advantages except:

• A) Accommodating a large number of risk factors in the assessment.
• B) Providing documentation for the chief audit executive, who must defend the long-range audit plan.
• C) Providing a systematic method of applying weightings to risks and priorities.
• D) Removing the need for judgment on the part of the chief audit executive.

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Definitions:

Fixed Costs

Costs that are constant regardless of the volume of goods or services produced by a company, including lease payments and maintenance expenditures.

Variable Costs

Disbursements that are contingent upon the magnitude of production or sales transactions.

Contribution Margin

The amount by which the sale of a product or service exceeds its variable costs, contributing to covering fixed costs and generating profit.

Variable Cost

A cost that varies directly with the level of production or sales volume.