The Risk That an Auditor Will Conclude, Based on Substantive

question 19

Multiple Choice

The risk that an auditor will conclude, based on substantive procedures, that a material error does not exist in an account balance when, in fact, such an error does exist is referred to as:

• A)sampling risk.
• B)detection risk.
• C)nonsampling risk.
• D)inherent risk.

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Definitions:

Long-Run Equilibrium

A state in which all factors of production and costs are variable, allowing firms to make adjustments such that supply equals demand, and no economic profits are earned.

Increased Demand

A situation where the desire or need for a product or service grows, often leading to higher sales or consumption.

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, and easy entry and exit from the market.

Long Run

A period in which all factors of production and costs are variable, enabling full adjustment to change.