PA is auditing a client where the accounts receivable are in worse shape than last year: many accounts are significantly overdue.How would this fact be dealt with in the audit risk model?
A)increase inherent risk for accounts receivable
B)decrease inherent risk for accounts receivable
C)increase control risk for accounts receivable
D)decrease control risk for accounts receivable

Question

Quizplus · Accepted Answer

The fact that the accounts receivable are in worse shape than last year and many accounts are overdue indicates a higher inherent risk. This is because there is a higher likelihood of misstatement or fraud. Therefore, the auditor would increase the inherent risk for accounts receivable in the audit risk model.

PA Is Auditing a Client Where the Accounts Receivable Are