explain why inherent risk is set for audit objectives for segments rather than for the overall audit
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In this discussion, explain why inherent risk is set for audit objectives for segments (classes of transactions, balances, and presentation and disclosure) rather than for the overall audit. What is the effect on the amount of evidence the auditor must accumulate when inherent risk changes from medium to high for an audit objective? Provide examples to illustrate your answer.
Explain why decisions about acceptable audit risk, inherent risk, the preliminary judgement about materiality, and performance materiality should be made early in the audit during the planning phase.
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.
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....
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?????
(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....
Is a large risk good or bad for inherent and control risk? How does the audit change with regard to these risks?
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...
Which of the following is an accurate statement regarding inherent risk? A) Inherent risk has no impact on the amount of evidence gathered. B) Auditors are generally conservative in setting inherent risk. C) The profession has established guidelines for setting inherent risk. D) Factors impacting inherent risk will affect all cycles, balances, and disclosures.
Auditors begin their assessments of inherent risk during audit planning. Which of the following would not help in assessing inherent risk during the planning phase? A) obtaining knowledge about the client’s business and industry B) identifying related parties C) touring the client’s plant and offices D) obtaining client’s agreement on the engagement on the engagement letter