If Inherent Risk Is High and No Assurance Has Been

question 14

Multiple Choice

If inherent risk is high and no assurance has been obtained from controls testing,

• A) only overall analytical review procedures need to be performed to reduce detection risk to an acceptable level.
• B) no further substantive testing needs to be performed.
• C) extensive substantive procedures need to be performed to estimate the dollar value of any error in the account balance.
• D) none of the above

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, which may differ from its market value.

Market Rate

The prevailing price or interest rate available in the marketplace for goods, services, or securities.

Coupon Rate

The coupon rate is the annual interest rate paid by a bond relative to its face value, expressed as a percentage.

Principal Amount

The initial size of a loan or bond or the amount of money invested, excluding any interest or dividends.