Indicate Whether Each of the Following Characteristics Relates to the Risk

question 14

Short Answer

Indicate whether each of the following characteristics relates to the risk of overreliance (O),risk of underreliance (U),both (B),or neither (N).
_____ 1.Is specifically considered by the auditor in determining sample size and evaluating sample results.
_____ 2.Is characterized by the auditor's sample indicating that the control is functioning effectively.
_____ 3.Results in the auditor drawing an incorrect conclusion with respect to the population being examined.
_____ 4.Is also referred to as the risk of assessing control risk too high.
_____ 5.Results in an effectiveness loss to the auditor.
_____ 6.Is used by the auditor in selecting sample items for examination and measuring sample items.
_____ 7.Is characterized by a population deviation rate of less than the tolerable rate of deviation.
_____ 8.Is an example of a sampling risk to which the auditor is exposed.

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Definitions:

Opportunity Cost

is the loss of potential gain from other alternatives when one alternative is chosen.

Rational Decisions

Choices made by individuals that align with their own self-interest and are based on an evaluation of the costs and benefits of the action.

Marginal Costs

The extra financial burden of generating one additional unit of a good or service.

Marginal Benefits

The incremental satisfaction or advantage obtained from the consumption of an additional unit of a good or service.