The audit risk model is a theoretical model designed to guide the decision process of the auditor.The model could be used as an equation to calculate detection risk,but it is probably more useful to think of the model as expressing relationships among the risks included in the model.Some of these relationships include
A)A higher risk of material misstatement will result in a lower detection risk.A lower detection risk means that the auditor will gather less substantive evidence.
B)Substantive testing is always done because the risk of material misstatement will never be zero.Detection risk determines how much substantive testing will be done.
C)A higher detection risk means more substantive testing is done.
D)In the model,audit risk is a varying number.It is the level of audit risk that should remain at the end of the audit.

Question

Quizplus · Accepted Answer

Detection risk determines the amount of substantive testing needed. A higher risk of material misstatement leads to a lower detection risk, requiring more substantive evidence, not less. Substantive testing is always necessary because the risk of material misstatement is never zero.

The Audit Risk Model Is a Theoretical Model Designed to Guide