The Audit Risk Model Is a Theoretical Model Designed to Guide

question 90

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 less substantive evidence.
• B)Substantive testing is usually done because the risk of material misstatement will usually 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 constant number.It is the level of audit risk that should remain at the end of the audit.

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Definitions:

Ecosphere

A term often used synonymously with the biosphere, referring to all the ecosystems on Earth where living organisms interact with each other and their physical environment.

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Biosphere

The biosphere encompasses all ecosystems and living organisms on Earth, along with the physical environments they inhabit.

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Recognized or discovered as being a particular person or thing.