1)An inaccurate form of the audit risk model would show that A) audit risk is di
ID: 2419214 • Letter: 1
Question
1)An inaccurate form of the audit risk model would show that
A) audit risk is directly related to all other risks in the model.
B) increases in control risk will cause decreases in detection risk.
C) detection risk may be determined from audit risk, inherent risk, and control risk.
D) detection risk is inversely related to inherent risk.
E) detection risk is inversely related to audit risk.
2)Specific audit objectives are normally
A)developed for each item in the financial statements and derived from the categories of management’s financial statement assertions.
B)derived from the categories of management’s financial statement assertions.
C)developed for each item in the financial statements.
D) the same as the categories of management’s financial statement assertions.
Explanation / Answer
1) C) detection risk may be determined from audit risk, inherent risk, and control risk.
The model is used by the auditor to manage the overall risk of the audit.Auditors proceed by examining the inherent and control risks pertaining to an audit engagement while gaining an understanding of the entity.and than detectection risk is considered so when the control and inherent risk is high detection risk is set at lower standards and vice versa
2) B)derived from the categories of management’s financial statement assertions.
Auditing standards require that auditors test basic underlying management assertions implicit in the financial statements.The various rights and obligations of the company are important management assertions inherent in the financial statements. So basically the objectives are normally based on management’s financial statement assertions.
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