As the Acceptable Level of Detection Risk Increases, an Auditor

question 20

Multiple Choice

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

• A)assessed level of control risk from a lower level to a higher level.
• B)assurance provided by tests of controls by using a larger sample size than planned.
• C)timing of substantive procedures from year-end to an interim date.
• D)nature of substantive procedures from less effective to more effective procedures.

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Definitions:

Parent Entity

A company that has control over one or more subsidiaries.

Company Tax Rate

The rate at which a company’s taxable income is taxed by the government, which varies by country and sometimes also by the type and size of the company.

Inventories

Goods owned with the intention to sell them through standard business activities, in the stage of being made for sale, or as parts or materials meant for consumption in production activities or while offering services.

Consolidation Worksheet

A tool used in the preparation of consolidated financial statements to combine the financial information of a parent company with its subsidiaries.