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Introduction: Internal control risks are risks which affects the effectiveness and controllability of the internal controls. The book value risks are those risks which affect the status of the conclusion of the account.
Requirement 1
Define the incorrect acceptance and rejection risk of internal control reliability and book value.
Introduction: Internal control risks are risks which affects the effectiveness and controllability of the internal controls. The book value risks are those risks which affect the status of the conclusion of the account.
Requirement 2
Most concerning risk for the auditor among four.
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Chapter 8 Solutions
Bundle: Auditing: A Risk Based-Approach, Loose-leaf Version, 11th + MindTap Accounting, 1 term (6 months) Printed Access Card
- Which of the following is appropriate about risk assessment? A. The assessed level of inherent and control risk can be sufficiently low, thus resulting to eliminating the need for substantive tests. B. Audit risk may be more effectively determined by assessing inherent and control risk separately. C. Detection risk is eliminated if an auditor were to examine 100 percent off the account balance or class of transactions. D. There is an iverse relationship between detection risk and the combined level of inherent and control riskarrow_forwardWhich of the following risks does the auditor least control? a. inherent risk b. control risk c. detection risk d. all are equally controllablearrow_forwardThe risk that an auditor issues a clean opinion when the financial statements are materially misstated is called O inherent risk. control risk. audit risk. O detection risk.arrow_forward
- Which of the following is not a principle relating to risk assessment? a. Identifies and analyses risks and respond to changes b. Designing the information systems c. Specifies objectives with sufficient clarity d. Considers the potential for fraud in assessing risksarrow_forwardWhen assessing and identifying Control Risk or Risk of Material Misstatement, the auditor may answer these following question(s) a. What is the risk of material misstatement (Identify Potential Risk) b. What could go wrong given this potential risk of material misstatement c. Could the risk lead to material misstatement (Yes/NO) d. All the above questionsarrow_forwardWhich of the following terms best describes the risk that audit procedures will fail to detect material misstatements? a. Control risk. b. Inherent risk. c. Detection risk. d. Audit risk.arrow_forward
- Which of the following statements is correct regarding detection risk and the audit risk model? OA. The two components of detection risk are test of details risk and inherent risk. B. Detection risk is equal to risk of material misstatement divided by audit risk. OC. There is an inverse relationship between the risk of material misstatement and detection risk. OD. There is a direct relationship between control risk and detection risk.arrow_forwardAssuming a lack of internal control in a client's system, the risk of material misstatement is known as? O Inherent risk Client risk O Detection risk O Audit riskarrow_forwardHow can an auditor reduce a client’s inherent risk?arrow_forward
- The audit risk model is the foundation of audit practice. True Falsearrow_forwardWhy are auditors more concerned with the risk of incorrect acceptance than the risk of incorrect rejection?arrow_forwardIf the auditor is unable to rely on the IT general controls or application controls of a client, they will assess audit risk as high. control risk as low. O inherent risk as high. O control risk as high.arrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage LearningAuditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
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