Which of the following statements is not true?
A) Inherent risk is inversely related to the amount of audit evidence whereas detection risk is directly related to the amount of audit evidence required.
B) Inherent risk is directly related to evidence whereas detection risk is inversely related to the amount of audit evidence required.
C) Inherent risk is the susceptibility of the financial statements to material error, assuming no internal controls.
D) Inherent risk and control risk are assessed by the auditor and function independently of the financial statement audit.

Question

Quizplus · Accepted Answer

Inherent risk is directly related to the amount of audit evidence required because the higher the inherent risk, the more evidence an auditor needs to gather to be assured that the financial statements are free of material misstatement. Detection risk, on the other hand, is inversely related to the amount of audit evidence required; as detection risk decreases, an auditor needs to gather more evidence. Therefore, statement A is not true as it incorrectly states the relationship between inherent risk, detection risk, and the amount of audit evidence required.

Which of the Following Statements Is Not True