Following are six situations that involve the audit risk model as it is used for planning audit evidence requirements in the audit of inventory.
REQUIRED
a. Explain what low , medium , and high mean for each of the four risks and planned evidence.
b. Fill in the blanks for planned detection risk and planned evidence using the terms low, medium , and high .
c. Using your knowledge of the relationships among the foregoing factors, state the effect on planned evidence (increase or decrease) of changing each of the following
five factors, while the other three remain constant:
1. An increase in acceptable audit risk.
2. An increase in control risk.
3. An increase in planned detection risk.
4. An increase in inherent risk.
5. An increase in inherent risk and a decrease in control risk of the same amount.