As the risk of material misstatement increases, the amount of evidence the auditor will accumulate should: Oc. Stay the same b. Increase a. Decrease d. Is indeterminate
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As the risk of material misstatement increases, the amount of evidence the auditor will accumulate should: Oc. Stay the same b. Increase a. Decrease d. Is indeterminate
Step by step
Solved in 3 steps
- Which of the following regarding the level of materiality is correct? Select one: a. An increase in materiality will decrease the amount of substantive testing b. In order to decrease detection risk, the auditor would increase materiality. c. A higher risk of material misstatement will require an increase in materiality d. A decrease in materiality will result in a decrease in the cost of an auditThe higher the risk of material misstatements the lower should audit risk be taken. True or falseAs the acceptable level of detection risk increases, an auditor may: Oa. Lower the assessed level of inherent risk. O b. Eliminate the assessed level of control risk from consideration as a planning factor. O c. Change the planned timing of substantive tests from year-end to interim. Od. Increase the risk of material misstatement.
- Which 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.Why is the audit team more concerned with controlling the exposure to the risk of overreliancethan with the risk of underreliance?a. Only the risk of overreliance results in an incorrect audit decision.b. The risk of underreliance is not related to the audit team’s study and evaluation of internalcontrol.c. The risk of overreliance can ultimately result in the audit team’s failing to reduce auditrisk to acceptable levels.d. The risk of underreliance can be controlled by performing tests of controls during theinterim period.The lower the materiality level, the higher the amount of required evidence from substantive procedures to compensate for increased risk. Further audit procedures include risk assessment procedures, test of controls and substantive tests. Group of answer choices False, True True, False True, True False, False
- On the basis of audit evidence gathered and evaluated, an auditor decides to decrease the level of detection risk from that originally planned. Assuming the same planned audit risk level, the change in the planned detection risk most likely resulted from a[n) A. Increase in the assessed control risk B.Increase in materiality levels. C. Decrease in the assessed inherent risk D.Decrease in the assessed citrol risk.Which of the following does NOT accurately describe detection risk? O assessed as low when control risk and inherent risk are assessed as high O increases in indirect proportion to the amount of substantive testing performed O inverse relationship between detection risk and the auditor's assessed risk of material misstatement O risk that the auditor's testing procedures will not detect a material misstatementThe risk of incorrect rejection and the risk of underreliance relate to thea. Effectiveness of the audit.b. Efficiency of the audit.c. Preliminary estimates of performance materiality.d. Tolerable misstatement.
- (c) Using your knowledge of the relationships among acceptable audit risk, inherent risk, control risk, planned detection risk, performance materiality, and planned evidence, State the effect that changing each of the following factors, while the other factors remain unchanged will have on planned work and evidence (state whether it will increase or decrease the planned audit work and evidence ) 1. an increase in acceptable audit risk 2. an increase in inherent risk 3. a decrease in control risk 4. an increase in planned detection risk 5. an increase in performance materialityWhich 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 riskWhat is risk of incorrect acceptance? A. The risk that the auditor concludes that a material misstatement exists when it does not exist. B. The risk that the auditor concludes that a material misstatement does not exist when it actually does not. C. The risk that the auditor concludes that a material misstatement does not exist when it does exist. D. The risk that the auditor concludes that a material misstatement exists when it actually does.
