Question 1 In using the Audit Risk Model, an auditor will choose a desired level of overall risk (OR), assess the level of Inherent Risk (IR) and Control Risk (CR) and then calculate the Detection Risk (DR) required that meets the OR. Required: Briefly explain how (if at all) each of the following items of information which an auditor learned during the planning phase of an audit would affect the elements of the risk model (each item is independent of the others).

a As part of a cost cutting program, management closed its internal audit department.

b The company made a successful initial public offering of common shares.

c The liquidity position of the client has deteriorated.

d The company president retired during the year.

e The company successfully obtained a large unsecured line of credit from its bank.

f The company's physical inventory will be taken 3 months prior to the end of the fiscal year.

g The company sold a wholly-owned subsidiary in a foreign country.

h The company's Treasurer has been charged by the Canada Revenue Agency with fraud in filing his personal tax returns.