When Control Risk Is High the Audit Strategy Is To

question 47

Multiple Choice

When control risk is high the audit strategy is to:

• A)assume the client's management is dishonest and immediately report them to ASIC
• B)increase reliance on tests of controls and reduce reliance on substantive testing of transactions and account balances.
• C)do little or no tests of controls and increase reliance on substantive testing of transactions and account balances
• D)refuse to continue with the remainder of the audit due to the high risk of fraud

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Definitions:

Indifferent

A term used in economics and decision theory to describe a situation where an individual or consumer does not prefer one option over another.

Diminishing Marginal

The principle that the marginal benefit of using or consuming one more unit of a good or service decreases as its quantity increases.

Rate

The speed at which a certain event occurs, often expressed as a quantity over time.

Substitution

The act of replacing one thing with another, especially a similar item, in response to changes in market conditions or personal preferences.