An Audit Team Uses the Assessed Risk of Material Misstatement

question 20

Multiple Choice

An audit team uses the assessed risk of material misstatement to:

• A)evaluate the effectiveness of the entity's internal control policies and activities.
• B)identify transactions and account balances where inherent risk is at the maximum.
• C)indicate whether materiality thresholds for planning and evaluation purposes are sufficiently high.
• D)determine the acceptable level of detection risk for financial statement assertions.

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Definitions:

Major Oil Companies

Large, international companies that are involved in the extraction, production, refinement, and distribution of oil.

Environmental Uncertainty

The degree to which future conditions or outcomes are unpredictable within the context of an organization's external environment, influencing strategic planning and decision-making.

Resource Dependence

A theory that posits that organizations depend on resources beyond their control, which forces them to engage in behaviors to acquire and maintain these resources.

Organizational Structure

The framework around which an organization’s operations are built, defining roles, responsibilities, and the hierarchy within the company.