Acceptable audit risk and the amount of substantive evidence required are inversely related; i.e., as acceptable audit risk increases, the amount of substantive evidence the auditor plans to accumulate should decrease.

Question

Quizplus · Accepted Answer

This statement is true according to the audit risk model. As acceptable audit risk increases, the auditor can afford to accept a higher level of inherent and control risk, and therefore, can rely less on substantive procedures to reduce detection risk to an acceptable level. Conversely, if the acceptable audit risk is low, the auditor needs to gather more substantive evidence to reduce detection risk to an acceptable level.

Acceptable Audit Risk and the Amount of Substantive Evidence Required