If the Auditor's Assessment of Audit Risk Is Low (E

question 77

Multiple Choice

If the auditor's assessment of audit risk is low (e.g., 1% rather than 5%) , what is the effect on the amount of direct testing performed by the auditor?

• A) Increase in direct testing.
• B) Decrease in direct testing
• C) No change in direct testing.
• D) Direct testing is not needed.

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Definitions:

Current Assets

Assets that are expected to be converted into cash or used up within one year or one business cycle, whichever is longer, such as cash, inventory, and receivables.

Cash Flow To Creditors

The amount of cash a company pays to its creditors and bondholders, indicating the flow of cash intended to cover debts.

Operating Cash Flow

Operating cash flow is a measure of the cash generated by a company's normal business operations, indicating its ability to cover operating expenses and invest in its business.

Net New Borrowing

The difference between the total amount of debt a company takes on and the amount it repays within a specific period, indicating the net increase in debt.