As the acceptable level of detection risk decreases, an auditor may:

Question

Quizplus · Accepted Answer

Choice "B" is correct. As the acceptable level of detection risk decreases, the assurance provided from substantive tests should increase. Consequently, the auditor should do one or more of the following: 1) change the nature of substantive tests from a less effective to a more effective procedure, 2) change the timing of the substantive tests, such as performing them at year-end rather than at an interim date, or 3) change the extent of substantive tests, such as using a larger sample size. Choice "A" is incorrect. As acceptable detection risk decreases, the extent of substantive tests should increase rather than decrease. The auditor cannot reassess inherent risk and control risk to compensate for the lower acceptable detection risk. Choice "C" is incorrect. Inherent risk is an integral part of the risk of material misstatement and cannot be eliminated from the computation of acceptable detection risk. Choice "D" is incorrect. The auditor cannot lower the assessed level of control risk unless tests of controls support that assessment.

As the Acceptable Level of Detection Risk Decreases, an Auditor