The Audit Risk Model Is a Theoretical Model Designed to Guide

question 43

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 lower control risk will mean that more internal control testing is done.If more internal control testing is done the auditor will also gather more substantive evidence.
• B)A higher control risk will mean that less internal control testing is done.If less internal control testing is done the auditor will gather more substantive evidence.
• C)Substantive testing is usually done regardless of the level of control risk because the risk of material misstatement will usually be zero.
• D)A higher detection risk means more substantive testing is done.
• E)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:

Empirical Economics

The branch of economics that analyzes data to develop verifiable theories or evaluate economic policies.

Economic History

The study of economies or economic phenomena in the past.

Aggregate Price Level

A measure of the overall level of prices of goods and services in an economy over a specified period, often used as an indicator of inflation.

Macroeconomics

The branch of economics that studies the behavior and performance of an economy as a whole, focusing on aggregate phenomena such as GDP, unemployment rates, and inflation.