When Testing Controls, Sampling Risk Is the Risk That the Auditor

question 11

Multiple Choice

When testing controls, sampling risk is the risk that the auditor

• A) concludes that their client's internal controls are ineffective when they are effective.
• B) concludes that their client's internal controls are effective when they are ineffective.
• C) both a and b
• D) none of the above

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Definitions:

Prior Period Adjustment

Corrections of errors in previously published financial statements not related to the current period.

Income Statement

A report detailing a company’s financial activities, including income and expenditures, over a designated accounting timeframe.

Computer Equipment

Hardware and devices, including computers, servers, and peripherals, necessary for the operations and management of digital tasks.

Price-earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, indicating market expectations.