The Auditors of Smith Electronics Wish to Limit the Audit

question 13

Multiple Choice

The auditors of Smith Electronics wish to limit the audit risk of material misstatement in the test of accounts receivable to 5 percent.They believe that inherent risk is 100%,there is a 40 percent risk that material misstatement could have bypassed the client's system of internal control,and a 50 percent risk that any existing material misstatement would not have been brought to light by the auditors' analytical procedures.What is the maximum risk of incorrect acceptance the auditors should specify in their substantive tests of details of accounts receivable?

• A)5 percent.
• B)10 percent.
• C)20 percent.
• D)25 percent.

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Definitions:

Imaginary Symptoms

Symptoms reported by an individual that have no physical basis in reality, often psychological in origin.

Moral Treatment

A therapeutic approach from the 19th century aiming at improving the lives of the mentally ill through humane treatment, social interaction, and focusing on individual moral and spiritual development.

Psychological Disorders

Mental disorders characterized by patterns of behavior or psychological symptoms that impact multiple life areas and/or cause significant distress.

Philippe Pinel

A French physician recognized for his pioneering work in the treatment of the mentally ill, emphasizing humane approaches over confinement and brutality.