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What occurs when the acceptable level of detection risk decreases

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14. The auditor uses the assessed level of risk of material misstatement to determine the acceptable level of detection risk for financial statement assertions. As the acceptable level of detection risk decreases, the auditor may do one or more of the following:
a. change the substantive tests to tests of controls
b. decrease the sample sizes for tests of controls
c. increase the extent of control testing
d. increase the extent of substantive testing

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Solution Summary

It is hard to figure out how the audit risk elements, that is control risk, inherent risk and detection risk, articulate when one piece of it moves. This solution illustrates this articulation. This is micro tutoring for the CPA exam, auditing section, or help learning undergraduate auditing work in your first auditing class. Homework help.

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14. The auditor uses the assessed level of risk of material misstatement to determine the acceptable level of detection risk for financial statement assertions. As the acceptable level of ...

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Carol Sargent, PhD
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  • MSc, University of Virginia
  • PhD, Georgia State University
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