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.

---

Definitions:

Traffic Congestion

Refers to the situation where there are more vehicles than the road can accommodate, leading to slower speeds, longer trip times, and increased vehicular queuing.

Marginal Social Cost

The total cost incurred by society when the production of a good or service is increased by one additional unit, including both private and external costs.

Common Resources

Goods that are non-excludable and rivalrous, meaning they are available to all but can be depleted by overuse.

Marginal Social Cost

This refers to the entire cost society bears for the production of an additional unit of a good, including both private costs borne by producers and external costs absorbed by others.