If the Auditor's Test of Controls Supports the Control Risk

question 90

True/False

If the auditor's test of controls supports the control risk assessment, planned detection risk in the audit risk model is decreased, and planned substantive tests should therefore be reduced.

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Definitions:

Depreciation Expense

A method for allocating the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Flotation Costs

The costs incurred by a company when it issues new securities, including underwriting fees, legal fees, and registration fees.

Cost Of Capital

A company's calculation of the minimum return necessary to justify the cost of a capital project or investment.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation and a claim on part of its assets and earnings.