Risk in Auditing Means That the Auditor Accepts Some Level

question 80

Multiple Choice

Risk in auditing means that the auditor accepts some level of uncertainty in performing the audit function.An effective auditor will:

• A) set the risk level between 5% and 10%.
• B) take any means available to reduce the risk to the lowest possible level.
• C) recognise that risks exist and deal with those risks in an appropriate manner.
• D) perform the audit procedures first and quantitatively set the risk level before forming an opinion and writing the report.

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Definitions:

Default Risk

The possibility that a borrower will fail to meet the obligations of a debt agreement.

Perpetuity

A type of annuity that pays a consistent amount indefinitely, with no end date.

Yield

The income return on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost or current market value.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates, typically expressed in years.