Chapter 4 Connect

B Assurance provided by substantive procedures. For a given audit risk, the acceptable detection risk is inversely related to the assessed risks of material misstatement. As the RMMs increase, the acceptable detection risk decreases, and the auditor requires more persuasive audit evidence. The auditor may (1) change the types of audit procedures and their combination, e.g., confirming the terms of a contract as well as inspecting it; (2) change the timing of substantive procedures, such as from an interim date to year end; or (3) change the extent of testing, such as by using a larger sample (AU-C 330 and AS 2301).

C. A nonrepresentative sample. Detection risk occurs when auditor misses material misstatements in financial statements. Detection risk, inherent risk, and control risk comprise audit risk. Auditors must implement correct audit procedures to avoid detection risk.

D. Engagement risk cannot be eliminated

D. extent of substantive tests.

c. Can never be known with certainty.

False

True

True

True

False Audit risk refers to the risk that an auditor may issue an unqualified report due to the auditor's failure to detect material misstatement either due to error or fraud. This risk is composed of: Inherent risk, the risk involved in the nature of business or transaction

D. error

B. fraud

D. Fraud

E. errors

B. fraud