Which of the Following Statements Is Not True

question 93

Multiple Choice

Which of the following statements is not true?

• A) Inherent risk is inversely related to the amount of audit evidence whereas detection risk is directly related to the amount of audit evidence required.
• B) Inherent risk is directly related to evidence whereas detection risk is inversely related to the amount of audit evidence required.
• C) Inherent risk is the susceptibility of the financial statements to material error, assuming no internal controls.
• D) Inherent risk and control risk are assessed by the auditor and function independently of the financial statement audit.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock and typically does not have voting rights but has a fixed dividend.

Common Stock

A type of equity security that represents ownership shares in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and/or capital appreciation.

Treasury Stock

Shares that were once part of the outstanding shares and were bought back by the company.

Preferred Stock

A class of ownership in a corporation with a priority claim on assets and earnings before common stock.