If an Auditor Decides That a Client Has Internal Controls

question 31

Multiple Choice

If an auditor decides that a client has internal controls that can reduce the likelihood of a material misstatement for an identified risk, the auditor will:

• A) test those controls.
• B) qualify the audit report.
• C) adopt a predominantly substantive approach.
• D) not test those controls.

Understand the distinction between standard deviation and standard error, and their respective uses in statistics.

Comprehend the concepts of null and alternative hypotheses and their role in hypothesis testing.

Identify and formulate correct null and alternative hypotheses.

Distinguish directional from non-directional hypotheses and their implications for statistical tests.

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Definitions:

Validity of Measure

Refers to the degree to which a test or instrument accurately measures what it intends to measure.

Variability

The extent to which data points in a set differ from each other and from the mean, indicating the spread or dispersion of the dataset.

Double-blind Design

An experimental design in which neither the participants nor the experimenters know who is receiving a particular treatment, used to eliminate bias in research findings.

Confounds Increased

The introduction of variables or factors that obscure or confuse the relationship between the variables being studied, complicating the interpretation of results.