Auditors Respond to Risk Primarily by I

question 37

Multiple Choice

Auditors respond to risk primarily by I. changing the extent of testing.
II) changing the types of audit procedures.

• A) I only
• B) II only
• C) both I and II
• D) neither I nor II

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Definitions:

Margin of Safety

The difference between actual or estimated sales and the sales level necessary to break even, indicating the risk level of not reaching break-even point.

Sales

The total amount of money generated from selling goods or services.

Degree of Operating Leverage

A ratio that measures the sensitivity of a company's operating income to a percentage change in revenue.

High-low Method

A technique used in accounting and finance to estimate variable and fixed components of a cost based on the highest and lowest activity levels.