Why Does the Risk of Overreliance Have an Inverse Relationship

question 52

Multiple Choice

Why does the risk of overreliance have an inverse relationship with sample size?

• A)As the audit team expects fewer deviations from the control policy or procedure,the audit team can appropriately examine fewer items.
• B)As the audit team is less concerned with making an incorrect conclusion with respect to reliance on the client's internal control,the audit team can appropriately examine fewer items.
• C)As the level of control risk increases,the audit team is placing less reliance on internal control and can appropriately examine fewer items.
• D)As the audit team requires greater compliance with the control policy or procedure,the audit team must examine a greater number of items.

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Definitions:

Ed/Es

This represents the ratio of the elasticity of demand (Ed) to the elasticity of supply (Es), indicating how responsive the quantity demanded and supplied are to changes in price.

Sales Tax

A tax imposed by governments on the sale of goods and services, collected by the retailer at the point of sale.

Ad Valorem Tax

A tax based on the assessed value of an item, such as property or goods, typically expressed as a percentage.

California

A diverse and populous state located on the Pacific coast of the United States, known for its significant economic, cultural, and political influence.