When an Auditor Increases the Assessed Level of Risk of Material

question 4

Multiple Choice

When an auditor increases the assessed level of risk of material misstatement because certain control procedures were determined to be ineffective, the auditor would most likely increase the:

• A)extent of tests of controls.
• B)level of detection risk.
• C)extent of substantive tests.
• D)level of inherent risk.

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Definitions:

Common Stock

Equity shares that represent a form of corporate ownership, entitling the shareholder to a share of the company's success through dividends and or capital appreciation.

Stock Split

A corporate action that increases the number of shares in a company, reducing the price per share without changing the market capitalization.

Preferred Stock

A type of stock that gives holders preferential treatment over common stockholders regarding dividends and claims on assets in case of liquidation.

Common Stock

Shares of ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.