Acceptable Risk of Assessing Control Risk Too Low Is the Risk

question 34

True/False

Acceptable risk of assessing control risk too low is the risk that the auditor is willing to take in accepting a control as effective when the true population exception rate is greater than the estimated population exception rate.

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Definitions:

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the costs associated with making or selling goods and services, showing profitability.

Activity Base

This term is associated with cost accounting and refers to a measure of activity that is used as a basis for allocating costs to cost objects.

Number of Miles

The number of miles refers to the total distance measured in miles, often used in contexts such as travel, transportation, and delivery services.

Controllable Revenues

Income over which a business or manager has direct control, often affected by decisions on pricing and marketing.