The Risk of Underreliance Is the Risk That the Sample

question 17

Multiple Choice

The risk of underreliance is the risk that the sample selected to test controls:

• A)Does not support the auditor's planned level of control risk when the true operating effectiveness of the control justifies such an assessment.
• B)Contains misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or transaction classes.
• C)Contains proportionally fewer monetary errors or deviations from prescribed control procedures than exist in the balance or class as a whole.
• D)Does not support the tolerable misstatement for some or all of management's assertions.

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Definitions:

Accounting Profits

The difference between total revenues and explicit costs, representing the net income reported on a company's financial statements.

Economic Profits

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs.

Accounting Profits

The net income for a company after all expenses have been deducted from revenues, according to generally accepted accounting principles.