Assume That You Are Using the Audit Risk Model to Plan

question 132

Essay

Assume that you are using the audit risk model to plan your testwork for an audit.a.If inherent risk was assessed at .50 and internal control risk was assessed at .30,what is detection risk?
b.What evidence should the auditor gather to support the inherent risk and control risk assessment?
c.If the auditor determines that control risk is .50 instead of .30,what impact will this have on detection risk? Calculate the new detection risk.d.When CR is .50 instead of .30 will the auditor perform more or less substantive testwork? Explain your answer.e.When CR is .50 instead of .30,will the auditor perform more or less internal control testwork? Explain your answer.f.If the auditor decreases control risk from .70 to .50,will they do more or less internal control testing? More or less substantive testing? Explain your answer.g.What is audit risk? Does audit risk differ from one client to another client? Explain your answer.h.Does audit risk differ from one auditing firm to another? Explain your answer.

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Definitions:

Responsibility

The obligation to perform duties or tasks correctly and being accountable for the outcomes.

Stable Workforce

A stable workforce refers to a work environment where the number of employees and their job roles remain constant over time, minimizing turnover and fostering consistent productivity and organizational knowledge.

Higher Wages

Increased compensation paid to workers, usually as a result of economic policies, bargaining agreements, or market conditions, leading to improved living standards.

Follow Demand

A strategy where production levels are adjusted in response to changes in market demand.