In Practice, Auditors Rarely Assign Numerical Probabilities to Inherent Risk

question 64

Essay

In practice, auditors rarely assign numerical probabilities to inherent risk, control risk, or audit risk. It is more common to assess these risks as high, medium, or low. For each of the four situations below, fill in the blanks for detection risk and the amount of evidence you would plan to gather ("planned evidence") using the terms high, medium, or low.
SITUATION

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Definitions:

Causal Attributions

The process by which individuals infer the causes of their own and others' behaviors, actions, and events.

Distinctiveness

The quality of being uniquely different from others in some respect, often used to describe features that distinguish one person, group, or thing from another.

Causal Hypothesis

A statement predicting a precise relationship between two or more variables, where changes in one variable cause changes in another.

Initial Causal Hypothesis

The original assumption or proposition about the cause-and-effect relationship between variables, awaiting testing or verification.