Which Is a True Statement About Audit Risk

question 83

Multiple Choice

Which is a true statement about audit risk?

• A) Audit risk measures the risk that a material misstatement could occur and not be detected by internal control.
• B) When auditors decide on a higher acceptable audit risk, they want to be more certain that the financial statements are not materially misstated.
• C) Audit assurance is the complement of acceptable audit risk.
• D) There is an inverse relationship between acceptable audit risk and planned detection risk.

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Definitions:

Number of Successes

This term refers to the count of times an outcome of interest occurs in a statistical experiment.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values.

Sampling Distribution

The probability distribution of a given statistic based on a random sample, used in hypothesis testing and estimation.

Large-Sample Significance

Refers to the level of significance or inferential reliability obtained when testing hypotheses with a large sample size, typically leading to more precise estimates.