Using Your Knowledge of the Relationships Among Acceptable Audit Risk

question 40

Short Answer

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 on planned evidence (increase or decrease) of changing each of the following factors, while the other factors remain unchanged.
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 materiality ________

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Definitions:

OTC Markets

Over-the-counter markets refer to decentralized markets where trading occurs directly between two parties without the supervision of an exchange.

Institution-To-Institution Trading

The buying and selling of securities between institutional investors, like pension funds and mutual funds, rather than individual investors.

Brokers

Intermediaries that facilitate buying and selling of securities, commodities, or other financial instruments for a commission.

Proprietorship

A business entity owned and run by one individual where there is no legal distinction between the owner and the business.