if audit risk is set at low inherent risk is high and control risk is low what should auditors s

Name: if audit risk is set at low inherent risk is high and control risk is low what should auditors set for detection risk 77948
Uploaded: 2023-07-04T04:53:40-08:00
Duration: 2 min 35 s
Channel: Madhur L
Description: if audit risk is set at low inherent risk is high and control risk is low what should auditors set for detection risk 77948

Step 1: Understand the components of audit risk. Audit risk is the risk that the auditor may iss

If audit risk is set at low inherent risk is high and...

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21. Which of the following is not a consideration when the auditor is attempting to assess the inherent risk? A. Nature of the client's business. B. Existence of related parties. C. Frequency and intensity of top management review. D. Susceptibility to defalcation. 22. Inherent risk is reduced when the likelihood of defalcations is low. This would be true for an account such as: A. Property, plant and equipment. B. Held for trading securities. C. Cash. D. Accounts receivable. 23. Which of the following is an incorrect statement? A. Detection risk is a function of the effectiveness of an auditing procedure and its application. B. Detection risk arises partly from uncertainties that exist when the auditor does not examine 100 percent of the population. C. Detection risk arises partly because of other uncertainties that exist even if the auditor were to examine 100 percent of the population. D. Detection risk exists independently of the audit of the financial statements. 24. Which of the following pertains to detection risk? A. An entity's asset custodian and record-keeping function for cash are handled by one process owner. B. An entity operates in a highly complex business environment. C. An auditor uses substantive analytical procedures instead of tests of balances. D. None of the above. 25. Which of the following statements is correct concerning an auditor's assessment of control risk? A. Assessing control risk may be performed concurrently during an audit with obtaining an understanding of the entity's internal control. B. Evidence about the operation of internal control in prior audits may not be considered during the current year's assessment of control risk. C. The basis for an auditor's conclusions about the assessed level of control risk need not be documented unless control risk is assessed at the maximum level. D. The lower the assessed level of control risk, the less assurance the evidence must provide that the control procedures are operating effectively.

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During the audit of Glazier LLC, a distributor of glass products throughout the continental United States, it has been determined by the auditor, Locktight CPAs, that the client's system of internal control is not as robust as had been initially thought. As a result of this finding, which of the following strategies is most likely? The auditor will assess risk of material misstatement as high and adopt a reliance approach, whereby the auditor will perform increased substantive testing, including tests of details. The auditor will advise the internal control function to begin remedying defective internal controls, and will return to the audit once these controls have been corrected. The auditor will assess the client's controls as defective, increase the risk of material misstatement and substantive tests, and decrease audit risk. The auditor is likely to assess the risk of material misstatement as high, and rely less on the client's controls. As a result, the auditor will increase substantive testing to compensate for this.

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II. Draw your conclusion as to what is required under the following independent cases: CASE 1: Maximum Population Deviation rate: 8% Sample size: 100 Population: 500 Sample Deviation: 3% The auditor planned the audit with professional skepticism with the vision that there will be no deviations as to population greater than 13% and no deviations as to sample greater than 12%. 81 to 83. What is the auditor's assessment of sampling risk? a. 3% b. 4 c. 5% d 5 84 to 86. What do you think is the initial assessment of the company's control risk? a. high level b. less than high level c. reasonable level d. negative level 87 to 89: After testing the sample, the auditor's conclusion would be a. Accept the planned level of control risk that it is set at a high level and accept the performance of substantive test. b. Accept the planned level of control risk that it is set at a low level and accept the performance of test of control. c. Change the planned level of control risk that it is set a high level and consider the audit efficiency d. Change the planned level of control risk that it is set a low level and consider the audit effectiveness

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Transcript

00:03 Hello students in this question.

00:05 You have to state which is which of the following is not a consideration and to assess inheritance risk.

00:10 So first of all, we will be defining inheritance risk, which is a risk.

00:14 It is a risk which is posted by an error or omission in the financial statement due to a factor other than the failure of internal control.

00:51 So it is most likely to occur when the transactions are complex a situation that require a high degree of high degree of judgment in regard to financial estimate.

01:13 So the while auditor will considering this risk.

01:18 He will take into factor the nature of client business because he must be knowing what is the nature of client business...

Question

If audit risk is set at low, inherent risk is high, and control risk is low, what should auditors set for detection risk?

Question

If audit risk is set at low, inherent risk is high, and control risk is low, what should auditors set for detection risk?

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