The Audit Risk Model Is a Theoretical Model Designed to Guide

question 110

Multiple Choice

The audit risk model is a theoretical model designed to guide the decision process of the auditor.The model could be used as an equation to calculate detection risk,but it is probably more useful to think of the model as expressing relationships among the risks included in the model.Some of these relationships include

• A)A higher risk of material misstatement will result in a lower detection risk.A lower detection risk means that the auditor will gather more substantive evidence
• B)Substantive testing is usually done because the risk of material misstatement will usually be greater than be zero.Detection risk determines how much substantive testing will be done.
• C)A higher detection risk means more substantive testing is done
• D)In the model,audit risk is a varying number.It is the level of audit risk that should remain at the end of the audit.

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Definitions:

Income

The monetary payment received for work or through investments, pensions, or social benefits, used by individuals or households to consume goods and services.

Marginal Utility

The increased enjoyment or value a buyer gets by consuming an extra unit of a merchandise or service.

Broccoli

A green vegetable from the cabbage family, known for its nutritional benefits and eaten either raw or cooked.

Rice

A staple food grain consumed worldwide, known for its versatility and ability to be grown in diverse environments, from mountain terraces to flat plains.