Inherent Risk and Control Risk Differ from Detection Risk in That

question 53

Multiple Choice

Inherent risk and control risk differ from detection risk in that inherent risk and control risk are:

• A)elements of audit risk whereas detection risk is not.
• B)changed at the auditor's discretion whereas detection risk is not.
• C)considered at the individual account-balance level whereas detection risk is not.
• D)functions of the client and its environment whereas detection risk is not.

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Definitions:

Current Liabilities

Short-term financial obligations that a company is required to pay within a year.

Return on Equity

A measure of a company's profitability that calculates how much profit is generated with the money shareholders have invested, reflecting financial performance and efficiency.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs from its total revenue.

Owner's Equity

This financial term represents the owner’s interest in the assets of a business, calculated as the difference between the business assets and its liabilities.