When external users place heavy reliance on the financial statements it is appropriate that
A) audit risk be increased.
B) inherent risk be decreased.
C) inherent risk be increased.
D) audit risk be decreased.

Question

Quizplus · Accepted Answer

When external users heavily rely on the financial statements, there is a high level of inherent risk involved. In order to mitigate this risk, the auditor should decrease the audit risk, meaning that they should conduct a more thorough audit and be more certain of the financial information presented. Therefore, the appropriate choice is to decrease audit risk.

When External Users Place Heavy Reliance on the Financial Statements