If Control Risk Increases and All Other Risks in the Audit

question 12

Multiple Choice

If control risk increases and all other risks in the audit risk model stay constant (except the one referred to below) , which of the following is correct?

• A) Detection risk must increase.
• B) Inherent risk will increase.
• C) Audit risk will decrease.
• D) Detection risk must decrease.

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Definitions:

Optimal Level

The most favorable or efficient level of output or activity under given conditions, maximizing benefits or minimizing costs.

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be used by everyone and one person's use does not diminish another's.

Free-rider Problem

A situation where individuals consume a good without contributing to its cost, typically in the context of public goods.

Public Good

A good or service offered to every member of a community for free, supplied by either governmental bodies or private entities without the intention of making a profit.