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:

Subsidiary

A subsidiary is a company that is controlled by another company, known as the parent company, usually through ownership of more than half of the subsidiary's voting stock.

Acquisition Method

A set of accounting procedures used during a merger or acquisition to consolidate the financial statements of both companies into a single set of financials.

Goodwill

An intangible asset that arises when a company is purchased for more than the value of its net tangible assets, often related to reputation or brand.

Fair Value

An estimate of the market value of an asset or liability, based on current prices in an orderly transaction between market participants at the measurement date.