Larry French Is Trying to Determine the Extent of Testing

question 3

Multiple Choice

Larry French is trying to determine the extent of testing his team will have to perform in order to determine whether controls are working. How will he decide how much testing to perform?

• A) He will utilize statistical sampling.
• B) He will use his professional judgment.
• C) He will use last year's results as a basis for this year's tests.
• D) none of the above

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Definitions:

Decision Tree Analysis

A graphical representation of possible solutions to a decision based on different conditions or events, used in risk management and decision making.

Cost Of Capital

The necessary rate of return to consider a capital expenditure project, like the development of a new factory, as viable.

Risk Profile

An evaluation of an individual's or organization's willingness to take risks, as well as their financial ability to manage the impact of those risks.

Incremental

Describing something as increasing or adding on, often in small or gradual steps.