Question

The two major factors affecting acceptable audit risk are:

A) inherent risk and the intended uses of the financial statements.
B) control risk and the intended uses of the financial statements.
C) the likely statement users and the intended uses of the statements.
D) the audit firm and the intended uses of the statements

Answer 1

The two main factors that affect acceptable audit risk are the likely users of the financial statements and how those statements will be used.

Step-by-step explanation:

The two major factors affecting acceptable audit risk are: C) the likely statement users and the intended uses of the statements. This is because different users may rely on the financial statements to different extents and for various purposes, which potentially influences the level of acceptable risk. The risks associated with financial investments could include default risk or interest rate risk, and they contribute to the calculation of audit risks as they affect the reliability and stability of financial statements.