The Acceptable Risk of Overreliance

question 112

Multiple Choice

The acceptable risk of overreliance

• A) is normally assessed at a high level when auditing an accelerated filer public company.
• B) and the extent of tests of controls depend on assessed control risk for accelerated filer public companies.
• C) and the control risk will be assessed as low for audits where there is extensive reliance on internal controls.
• D) does not impact the effectiveness of the audit.

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Definitions:

Lack-of-participation Error

A mistake or oversight that occurs when not all relevant parties are involved in a decision-making process, leading to potential biases or incomplete information.

Escalation Error

Escalation Error refers to the phenomenon where individuals or groups continue to invest in a decision despite new evidence suggesting it may be wrong, often due to sunk costs or ego.

Decision-making Process

A series of steps undertaken by individuals or organizations to select the best course of action among several alternatives.

Evaluate Results

The process of analyzing outcomes to determine the effectiveness of actions taken and to inform future decisions.