Which of the Following Is an Accurate Statement Regarding How

question 23

Multiple Choice

Which of the following is an accurate statement regarding how the acceptable risk of overreliance (ARO) and the acceptable risk of incorrect acceptance (ARIA) interact to affect evidence accumulation?

• A) If internal controls are likely to be effective, preliminary control risk can be increased.
• B) A lower control risk requires a lower ARO in testing the controls, which requires a smaller sample size.
• C) If controls are found to be effective, control risk can remain low, which permits the auditor to increase ARIA, thereby requiring a smaller sample size in the substantive tests of details of balances.
• D) If misstatements are considered unlikely, ARIA will decrease, and the sample size will also decrease.

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Definitions:

Tsunami

A large, long high sea wave caused by underwater earthquakes, volcanic eruptions, or landslides.

Sublimation

The process by which material moves from a solid phase directly into a vapor, as occurs when a glacier loses ice molecules directly to the air.

Equilibrium Line

The zone in a glacier where the losses of ice and snow balance the accumulation of ice and snow.

Accumulation

The process of materials or energies gathering together over time, often resulting in a gradual increase in amount or the formation of a new structure.