Describe the Audit Risk Model and Each of Its Components.
Describe the audit risk model and each of its components.
If an auditor believes the client will have financial difficulties after the audit report is issued,and external users will be relying heavily on the financial statements,the auditor will probably set acceptable audit risk as low.
Engagement risk is effectively the audit firm's business risk.
Which of the following statements regarding inherent risk is correct? A) Inherent risk is unaffected by the auditor's experience with client's organization. B) Most auditors set a low inherent risk in the first year of an audit and increase it if experience shows that it was incorrect. C) Most auditors set a high inherent risk in the first year of an audit and reduce it in subsequent years as they gain more knowledge about the company. D) Inherent risk is dependent upon the strengths in client's internal control system.