Assessing Control Risk at Less Than High Would Most Likely

question 27

Multiple Choice

Assessing control risk at less than high would most likely involve:

• A)changing the timing of substantive tests by omitting interim testing and performing the tests at year-end.
• B)identifying specific internal controls relevant to specific assertions.
• C)performing more extensive substantive tests with larger sample sizes than originally planned.
• D)reducing inherent risk for most of the assertions relevant to significant account balances.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used in evaluating investment opportunities.

Internal Rate of Return

A financial metric used to evaluate the profitability of an investment, representing the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero.

Required Rate of Return

The minimum annual percentage return a investor expects to achieve from an investment, considering the risk involved.

Simple Rate of Return

A method of evaluating the financial performance of an investment by dividing annual incremental operating income by initial investment.