Which of the Following Is a Correct Statement

question 107

Multiple Choice

Which of the following is a correct statement?

• A)When internal controls are effective, control risk can be reduced, and therefore the auditor will decrease the ARIA.
• B)There is a direct relationship between ARIA and the required sample size.
• C)A lower control risk risk requires a lower ARO in testing the controls.
• D)ARO measures the auditor's desired assurance for an account balance.

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Definitions:

Total Assets Ratio

A financial metric comparing the total assets of a company to another financial measure, used to evaluate the company's financial health.

Tax Deductions

Expenses that can be deducted from adjusted gross income to reduce the amount of taxable income.

Off-Balance-Sheet Financing

Financial obligations not recorded on the balance sheet, often used to keep debt-to-equity ratios low.

Substantial Down Payment

A significant initial payment made towards the purchase of an asset, often indicating the buyer's commitment and reducing the amount financed.