Mark Hopper is planning the audit of the investments account for audit client Garden Supply Co. (GSC). GSC invests excess cash at the end of the summer sales season through an investment manager who invests in equity and debt securities for GSC’s account. Hopper has assessed the following risks as low, medium, or high for the relevant balance-related audit objectives in the investment account. 

Required:

a. Describe each of the four identified risks in the columns of the table above. 

b. Fill in the blank for planned detection risk for each balance-related audit objective using the terms low, medium, or high. 

c. Which audit objectives require the greatest amount of evidence and which require the least? 

d. Through audit testing, Hopper finds the investment manager’s controls over recording purchases and sales of securities are not as effective as originally assessed. What should Hopper do?

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Risk of Material Misstatements Balance-Related Acceptable Audit Risk Planned Audit Objectives Inherent Risk Control Risk Detection Risk Existence Low Medium Medium Completeness Medium Low Medium Accuracy Medium Medium Medium Cutoff Medium Medium Low Detail tie-in Medium Medium Low Realizable value Low High Medium Classification Medium Low Low Rights and obligations Medium Medium Low Presentation Medium Low Medium