If an Auditor Concludes That Internal Controls Are Likely to Be

question 81

Multiple Choice

If an auditor concludes that internal controls are likely to be effective, the preliminary assessment of control risk can be reduced, leading to which of the following impacts on the acceptable risk of incorrect acceptance?

• A) reduction in
• B) increase in
• C) elimination of
• D) increase or decrease

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Definitions:

Trade-in Allowance

The discounted price offered when a customer gives a used item as part of the payment for a new item, reducing the cash cost of the new purchase.

Book Value

The net value of a company's assets minus its liabilities, often used to assess the company's worth.

Gain

A financial increase or profit, particularly from the sale of investments or assets, not typically related to the entity’s primary operations.

Extraordinary Repair

A significant restoration or overhaul that extends an asset's useful life beyond its original forecast.