As the Acceptable Level of Detection Risk Decreases, an Auditor

question 48

Multiple Choice

As the acceptable level of detection risk decreases, an auditor may change the:

• A)timing of tests of controls by performing them at an interim date rather than at year-end.
• B)nature of substantive procedures from less effective to more effective procedures.
• C)timing of tests of controls by performing them at several dates rather than at one time.
• D)assessed level of risk of material misstatement to a higher amount.

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Definitions:

Reported Income

The income figure that a company officially reports to its shareholders and regulatory bodies, often after adjustments and before taxes.

Influencing Investee

An investment situation where the investor has significant influence over, but not control of, the financial and operating policies of another entity.

Available-for-sale Securities

Financial assets not classified as held-to-maturity or trading securities, which can be sold in response to liquidity needs or changes in interest rates.

Common Stock

A type of security that represents ownership in a corporation, granting holders voting rights and a share in the company's profits via dividends.