On the Basis of Audit Evidence Gathered and Evaluated,an Auditor

question 25

Multiple Choice

On the basis of audit evidence gathered and evaluated,an auditor decides to increase the assessed level of risk of material misstatement from that originally planned.To achieve an overall audit risk level that is substantially the same as the planned audit risk level,the auditor would

• A) Decrease amount of substantive testing.
• B) Decrease detection risk.
• C) Increase detection risk.
• D) Increase materiality levels.

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Definitions:

Beta Coefficient

A parameter for assessing the fickleness, or inherent market risk, of a security or a composite of investments compared to the overall market.

Risk-free Asset

An investment that is expected to return its original investment without any loss and with a certain rate of return. Typically, government bonds are considered close to risk-free.

Beta

Beta is a measure of a stock's volatility in relation to the overall market, indicating the stock's risk compared to the market risk.