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:

Consume Less

The action of reducing the amount of goods and services that individuals or societies use.

Residential Home Building

The process or business of creating new homes within residential areas, often involving construction firms, architects, and various contractors.

Volatile Sector

An industry or market segment known for high levels of price fluctuation, often due to changes in supply and demand, political instability, or other factors.

Gross Investment

Gross investment refers to the total amount of money spent on acquiring new capital assets or improving existing ones before accounting for depreciation.