If Tests of Controls Induce the Auditor to Change the Assessed

question 58

Multiple Choice

If tests of controls induce the auditor to change the assessed level of control risk for property plant & equipment from 50 percent to 100 percent and audit risk (6 percent) and inherent risk remain constant,the acceptable level of detection risk

• A) Would most likely change from 10 percent to 5 percent.
• B) Would most likely change from 20 percent to 40 percent.
• C) Would most likely change from 30 percent to 15 percent.
• D) Would be unchanged because the auditor has control over detection risk.
• E) Cannot be determined because inherent risk is not given.

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Definitions:

Accrued Wages Expense

Costs incurred by a company for wages that have been earned by employees but have not yet been paid.

Annuity

A series of periodic cash receipts or payments that are equal in amount each interest period.

Consecutive Payments

Regular payments made in a series one after another, often referring to loan repayments or lease payments.

Accrued Liability

A liability that has been incurred, often for expenses, that has not yet been paid or recorded at the end of the accounting period.