Multiple Choice Questions
The following questions deal with audit risk and evidence. Choose the best response.
a. As the acceptable level of detection risk decreases, an auditor may
(1) Reduce substantive testing by relying on the assessments of inherent risk and control risk.
(2) Postpone the planned timing of substantive tests from interim dates to the year-end.
(3) Eliminate the assessed level of inherent risk from consideration as a planning factor.
(4) Lower the assessed level of control risk from the maximum level to below the maximum.
b. As lower acceptable levels of both audit risk and materiality are established, the auditor should plan more work on individual accounts to
(1) Find smaller misstatements.
(2) Find larger misstatements.
(3) Increase the tolerable misstatement in the accounts.
(4) Increase materiality in the accounts.
c. Based on evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor could
(1) Decrease detection risk.
(2) Increase materiality levels.
(3) Decrease substantive testing.
(4) Increase inherent risk.