In the Annual Audit of the Financial Statements of a Company

question 224

Multiple Choice

In the annual audit of the financial statements of a company with high inherent risk and a very strong control system, the external auditor may be able to allow detection risk to rise because.

• A) Audit risk has been reduced.
• B) Control risk has been assessed at a lower level.
• C) The company's operations are very susceptible to misstatements.
• D) Whenever inherent risk is high, control risk is disregarded.

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Definitions:

Avoid Risk

The strategy of making decisions that minimize the possibility of experiencing negative outcomes.

Auto Insurance

A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident or other vehicle-related damages.

Probability

A measure of the likelihood that a specific event will occur, often expressed as a number between 0 and 1.

Expected Loss

An estimate of the amount of money or value that may be lost in an investment or venture, considering the probability of various outcomes.