How Does the Auditor Typically Determine the Appropriate Level of the Risk

question 24

Multiple Choice

How does the auditor typically determine the appropriate level of the risk of incorrect rejection when using classical variables sampling?

• A)Based on prior assessments of audit risk,risk of material misstatement,and analytical procedures risk.
• B)Based on the recorded amount of the account balance as well as the relationship of the account balance with important financial statement subtotals.
• C)Based on the findings in prior audits or based on a small sample taken during the current year.
• D)Based on the anticipated cost of conducting additional substantive procedures.

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Definitions:

Greater Visibility

Increased awareness or recognition, often referring to a company's brand, products, or services in the marketplace or amongst consumers.

Isolation

The process or state of being separated from others, which can refer to physical, social, or emotional distancing.

Business Creditors

Individuals or institutions that a company owes money to due to past transactions, such as suppliers or banks.

Partnership

Association of two or more persons who operate a business as co-owners by voluntary legal agreement.