When Discussing Acceptable Audit Risk (AAR)and the Audit Risk Model

question 99

Multiple Choice

When discussing acceptable audit risk (AAR) and the audit risk model, which one of the following statements is true?

• A) The terms audit assurance, overall assurance. and level of assurance are synonyms for AAR.
• B) When the auditor decides on a lower acceptable audit risk, it means the auditor wants to be certain that the financial statements are not materially misstated.
• C) AAR is the risk that the auditor is willing to take that the financial statements are fairly stated after the audit is completed and an unqualified opinion has been reached.
• D) AAR is objectively determined by the auditor.

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Definitions:

Perpetual Inventory Method

An accounting method that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

General Journal Entry

A general journal entry is a record in the general journal that is used to document business transactions according to the double-entry bookkeeping system.

Perpetual Inventory Method

The perpetual inventory method continuously updates inventory records and cost of goods sold every time a transaction occurs.

General Journal Entry

The initial recording of financial transactions in the general journal, indicating the accounts and amounts to be debited and credited.