When Dealing with Audit Risk

question 30

Multiple Choice

When dealing with audit risk:

• A)audit risk should not be a factor when determining if a new client should be accepted.
• B)audits with a low acceptable audit risk generally result in lower audit fees.
• C)if management of a company has a reputation of integrity, but is also known to take aggressive financial risks, the auditor should not accept the company as a new client.
• D)if the auditor concludes that acceptable audit risk is low, but the client is still acceptable, the auditor may still accept the engagement but increase the audit fee.

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Definitions:

Case-control

A type of observational study that compares individuals with a specific condition (cases) to those without the condition (controls) to identify potential risk factors.

Retrospective

Looking back on or dealing with past events or situations.

Independent Risk Factor

A variable that on its own increases the likelihood of developing a disease or health condition, independent of other factors.

Risk Factor

An attribute, characteristic or exposure of an individual that increases the likelihood of developing a disease or injury.