AAudit Risks for Particular Accounts Can Be Expressed in the Model

question 110

Essay

A.Audit risks for particular accounts can be expressed in the model: Audit risk (AR)= Inherent risk (IR)x Internal control risk (CR)x Detection risk (DR).If an audit risk is set at 5 percent,the inherent risk at 80 percent,and the internal control risk at 25 percent,what would be the detection risk?
A. Detection risk =.05/(.80 X .25) = .25
B. .01/(.80 X .25) =.05
B. If the audit team wanted to reduce the audit risk to 1 percent, what would be the detection risk?
C. The audit team would have to increase the amount and effectiveness of evidence gathered from substantive procedures.
C. What would the audit team have to do to reduce the audit risk?

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Definitions:

Phylum

A rank in the biological taxonomy that is below kingdom and above class, used to group organisms that share basic structural or developmental characteristics.

Phylum

A level of classification in the biological taxonomy that groups together organisms based on a common plan of body structure or organization.

Phylum

A phylum is a rank of classification in biology that groups together organisms with a similar body plan or significant shared characteristics.

Phylum

A level of classification in the biological taxonomy that groups together organisms with a common body plan or significant shared characteristics.