When dealing with audit risk:
A)audit risk should not be a factor when determining if a new client should be accepted.
B)audits with a low acceptable audit risk generally result in lower audit fees.
C)if management of a company has a reputation of integrity, but is also known to take aggressive financial risks, the auditor should not accept the company as a new client.
D)if the auditor concludes that acceptable audit risk is low, but the client is still acceptable, the auditor may still accept the engagement but increase the audit fee.

Question

Quizplus · Accepted Answer

If the auditor concludes that acceptable audit risk is low, but the client is still acceptable, the auditor may still accept the engagement but increase the audit fee. This is because a lower acceptable audit risk may require more extensive testing and higher level of assurance which would require more work and resources on the part of the auditor. Increasing the audit fee ensures that the cost of providing such services is covered.

When Dealing with Audit Risk