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Using your knowledge of the relationships among acceptable audit risk, inherent risk, control risk, planned detection risk, performance materiality, and planned evidence, state the effect on planned evidence (increase or decrease) of changing each of the following factors, while the other factors remain unchanged.

1. An increase in planned detection risk. _decrease_______.
2. A decrease in acceptable audit risk.__ ____.
3. A decrease in performance materiality. ________.
4. An increase in inherent risk. __increase______.
5. An increase in control risk. ________.

Respuesta :

Answer:

(1) An increase in planned detection risk. _Increase Audit Evidence

(2 ) A decrease in acceptable audit risk.__ Increase Audit Evidence

(3)  A decrease in performance materiality. _  Increase Audit Evidence

(4) An increase in inherent risk. __Increase Audit Evidence

(5). An increase in control risk___  Increase Audit Evidence

Explanation:

(1) The higher the detection risk, the higher the risk of material misstatement in the financial statement. Hence, auditor must response to this by obtaining sufficient appropriate audit evidence.

(2) This is usually the case when control risk is very high and in order to reduce detection risk, auditor decides to use full substantive-based approach to audit.

(3) As explained in 2

(4)This is usually the case when inherent risk is very high and probably control risk is high too, then in order to reduce detection risk, auditor decides to use full substantive-based approach to audit.

(5) As in 2

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