The Risk of Material Misstatement Resulting from the Internal Controls

question 19

Multiple Choice

The risk of material misstatement resulting from the internal controls in place failing to detect a fraudulent or erroneous transaction is:

• A)An inherent risk
• B)A control risk
• C)A detection risk
• D)An incontrollable risk

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Definitions:

Tax Rate

The proportion of one's earnings or company profits that is required to be paid as tax.

Degree Of Financial Leverage (DFL)

A measure that evaluates the sensitivity of a company's earnings per share to fluctuations in its operating income, indicating financial risk.

Interest

The return on a debt investment.

Breakeven Volume

The number of units a company must sell to cover its fixed and variable costs, with no profit and no loss.