The Auditor Set Audit Risk at 5%, Inherent Risk at 100

question 40

Multiple Choice

The auditor set audit risk at 5%, inherent risk at 100%, and control risk at 50%, and determined a detection risk of 10%. If control risk had been 80%, detection risk would be about

• A) 16%.
• B) 10%.
• C) 6%.
• D) 5%.

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Definitions:

Inventory

The total amount of goods and materials held by a company intended for sale or production.

Net Income

It represents the amount of money that remains after subtracting all operating expenses, taxes, and costs from total revenue – a key indicator of a company's financial health.

Long-Term Debt

Long-term debt refers to loans and financial obligations lasting more than one year, often used for significant investments or expenses by a company.