In situations in which the auditor believes the chance of financial failure or loss is high, and there is a corresponding increase in engagement risk for the auditor, acceptable audit risk should:

Question

Quizplus · Accepted Answer

When there is a high chance of financial failure or loss and consequently an increase in engagement risk for the auditor, acceptable audit risk should be reduced. This is because the auditor needs to take more caution and care in their audit procedures to reduce the risk of not detecting material misstatements in the financial statements. Therefore, a lower acceptable audit risk will help to ensure the auditor's work is as effective as possible.

In Situations in Which the Auditor Believes the Chance of Financial