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.

---

Definitions:

Netherlands

The Netherlands is a country in Northwestern Europe known for its flat landscape, extensive canal systems, cycling routes, and tulip fields.

Tulips

A type of flowering plant known for its bright colors and bulbous shape, often associated with the Netherlands.

Ricardian Model

An economic theory that focuses on comparative advantage, suggesting that countries should specialize in producing goods they can produce most efficiently.

Production Possibility Frontiers

A curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors.