As AP risk decreases, then:
A) detection risk increases.
B) audit risk decreases.
C) inherent risk increases.
D) Both a and b

Question

Quizplus · Accepted Answer

As AP risk decreases, audit risk decreases as well. This is because when the risk of misstatement in the accounts payable is lower, there is less likelihood of material misstatements in the financial statements, which reduces the overall audit risk. Detection risk is not affected by changes in AP risk, as it is determined by the auditors' testing procedures. Inherent risk would also decrease as AP risk decreases, as inherent risk is the risk associated with a particular account or balance before considering the effectiveness of internal controls.

As AP Risk Decreases, Then