Which of the Following Is a Correct Statement

question 62

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 requires a lower ARO in testing the controls.
• D) ARO measures the auditor's desired assurance for an account balance.

---

Definitions:

Production Volume Measures

Metrics or units of measurement used to gauge the quantity of products created by a company within a specific period.

Direct Labour Hours

The total hours worked by employees directly involved in the production process, not including hours worked by supervisory or maintenance personnel.

Machine Hours

A measure of production time, representing the hours a machine is operated in the manufacturing of a product.

Costing System

A method or procedure adopted by a business to estimate the cost of its products for inventory valuation, cost control, and decision making.