When Might an Auditor Decide NOT to Reduce Assessed Control

question 39

Multiple Choice

When might an auditor decide NOT to reduce assessed control risk even if internal controls are adequate?

• A) The cost of the study and tests of controls will exceed the savings from reduced substantive procedures.
• B) A qualified opinion will be issued.
• C) The auditor plans to rely on the controls and reduce substantive testing.
• D) all of the above

---

Definitions:

Expansion Path

Curve passing through points of tangency between a firm’s isocost lines and its isoquants.

Long Run

A period in which all factors of production and costs are variable, allowing all inputs to be adjusted.

Marginal Cost

The extra financial outlay needed for manufacturing another unit of a product or service.

Marginal Product

The boost in production one can expect by adding an extra unit of labor or capital, ceteris paribus.