When external users place heavy reliance on the financial statements,it is appropriate that
A)acceptable audit risk be increased.
B)inherent risk be decreased.
C)inherent risk be increased.
D)acceptable audit risk be decreased.

Question

Quizplus · Accepted Answer

When external users place heavy reliance on the financial statements, it is important for the auditor to decrease acceptable audit risk to provide a higher level of assurance in the statements. Inherent risk, which is the susceptibility of an account balance or transaction to a material misstatement, may or may not be affected by external users' reliance on the financial statements. Therefore, increasing or decreasing inherent risk is not necessarily appropriate.

When External Users Place Heavy Reliance on the Financial Statements,it