Is a large risk good or bad for inherent and control risk? How does the audit...
Is a large risk good or bad for inherent and control risk? How does the audit change with regard to these risks?
Homework Answers
| Audit Risk consists of 3 risk which are: | |||
| (i)Inherent Risk | |||
| (ii)Control Risk | |||
| (iii)Detection Risk | |||
| Audit Risk =Inherent Risk X Control Risk X Detection Risk | |||
| Out of this Ingherent and Control risk together determine the level at which Detection risk is to be kept | |||
| If the Inherent and Control risk are higher then the the auditor may set the detection risk at a lower level by increasing the sample size | |||
| If the Inherent and Control risk are lower then the the auditor may set the detection risk at a higher level by decreasing the sample size | |||
| So it can be said that the level of Inherent risk and Control risk determines the level of detection risk to be applied and the level of sampling | |||
| is also decided based upon the level of detection risk | |||
Add Answer to:
Is a large risk good or bad for inherent and control risk? How
does the audit...
Using the audit risk model, state the effect on control risk, inherent risk, acceptable audit risk,...
Using the audit risk model, state the effect on control risk, inherent risk, acceptable audit risk, and planned evidence for each of the following independent events. In each of the events cirlce one letter for each of the three independent variables and planned evidence: I=increase, D=decrease, N= no effect, and C= cannot determine from the information provided. A. The client's management materially decreased long-term contractual debt: Control risk IDNC Acceptable audit risk IDNC Inherent risk IDNC Planned evidence IDNC B....
Inherent risk and control risk differ from detection risk in which of the following ways? Inherent...
Inherent risk and control risk differ from detection risk in which of the following ways? Inherent risk and control risk exist independently of the audit. Inherent risk and control risk exist as a result of the auditor's judgment about materiality. Inherent risk and control risk are calculated by the client. Inherent risk and control risk are controlled by the auditor.
Explain how internal control work done by auditors impacts the audit risk equation. Does control risk...
Explain how internal control work done by auditors impacts the audit risk equation. Does control risk change if the auditors are providing an opinion over internal controls? How is detection risk impacted?
Explain how internal control work done by auditors impacts the audit risk equation. Does control risk...
Explain how internal control work done by auditors impacts the audit risk equation. Does control risk change if the auditors are providing an opinion over internal controls? How is detection risk impacted?
how does the auditor affect detection risk and consequently control audit risk?
how does the auditor affect detection risk and consequently control audit risk?
# "If the Inherent Risk level is: "And the Control Risk level is: What is the...
# "If the Inherent Risk level is: "And the Control Risk level is: What is the Residual Risk level? "Inherent Risk Level Question Control Question 1 High High ? "Provide an example of an account with a high inherent risk For this specific account and risk level, provide an example of an internal control with a high level of control risk 2 High Low ? "Provide an example of an account with a high inherent risk For this specific account...
The auditor concludes that the clients inherent risk is 40% and control risk is 60%. The...
The auditor concludes that the clients inherent risk is 40% and control risk is 60%. The auditor decides to test controls in order to be able to rely on controls. The auditor plans to conduct year-end substantive audit procedures in order to achieve a detection risk of 30%. What is the probability that that auditor will discover a material misstatement during the year-end substantive audit procedures? Answer = 1.68 [(.6 X .4) X 7] Why?????
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk...
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk remains the same, detection risk has an inverse relationship to inherent risk and control risk. The auditor may make separate or combined assessments of inherent risk and control risk. Detection risk cannot be changed at the auditor's discretion The greater the inherent and control risks the auditor believes exist, the less detection risk that can be accepted. (d) 7. Inherent risk and control risk...
(TCO F) In a financial statement audit, inherent risk is evaluated to help an auditor assess...
(TCO F) In a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following? 1 The risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion 2 The risk that the internal control system will not detect a material misstatement of a financial statement assertion 3 The internal audit department's objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee...
(TCO H) Audit risk consists of inherent risk, control risk, and detection risk. (a) Please completely define each of the above. (b) Indicate whether each of the statements below is true or false and e...
(TCO H) Audit risk consists of inherent risk, control risk, and detection risk. (a) Please completely define each of the above. (b) Indicate whether each of the statements below is true or false and explain your position. (1) The risk that material misstatement will not be prevented or detected on a timely basis by internal controls can be reduced to 0 by having effective controls in place. (2) Detection risk is a function of the efficiency of an auditing procedure....
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk remains the same, detection risk has an inverse relationship to inherent risk and control risk. The auditor may make separate or combined assessments of inherent risk and control risk. Detection risk cannot be changed at the auditor's discretion The greater the inherent and control risks the auditor believes exist, the less detection risk that can be accepted. (d) 7. Inherent risk and control risk...
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