The Audit Risk Model Is a Theoretical Model Designed to Guide

question 51

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 always done because the risk of material misstatement will never 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:

Forecasted Value

A prediction of future values based on historical data and analysis.

Time Period 5

An unspecified duration or sequence in a series, labeled as "5" for identification or classification purposes.

Seasonal Variation

Regular fluctuations in data or activity levels that occur at specific periods of the year, often influenced by weather, holidays, and other seasonal factors.

Time Series

Data points collected or recorded at regular time intervals.