The Highest-Cost Audit Will Be Incurred When the Auditor Expects

question 24

Multiple Choice

The highest-cost audit will be incurred when the auditor expects that the internal control system would

• A)be effective but the auditor found extensive control test deviations.
• B)have few effective controls but client's personnel were well-trained and knowledgeable.
• C)be very sophisticated and the tests of controls confirmed this.
• D)have few effective controls and tests of balances found many errors.

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Definitions:

Semistrong-form Efficient

Refers to a market efficiency form where prices include all publicly available information, including both historical and newly released financial data.

Weak-form Efficient

A level of market efficiency that assumes all past trading information is already reflected in stock prices, thus negating the ability to gain higher returns through analysis of historical prices.

Survivorship Bias

Survivorship bias is the logical error of concentrating on the entities or people that made it past some selection process and overlooking those that did not, often leading to false conclusions.

Data Mining

The process of using statistical techniques to extract and identify patterns, relationships, or information from large datasets.