The audit risk model is a theoretical model designed to guide the decision process of the auditor.The model could be used as an equation to calculate detection risk,but it is probably more useful to think of the model as expressing relationships among the risks included in the model.Some of these relationships include
A)A lower risk of material misstatement will result in a higher detection risk.A higher detection risk means that the auditor will gather less substantive evidence.
B)Substantive testing is usually done because the risk of material misstatement will usually be zero.Detection risk determines how much substantive testing will be done.
C)A lower detection risk means less substantive testing is done.
D)In the model,audit risk is a varying number.It is the level of audit risk that should remain at the end of the audit.

Question

Quizplus · Accepted Answer

DA lower risk of material misstatement implies that the auditor perceives a lower likelihood of significant errors or fraud in the financial statements, which in turn allows for a higher detection risk. This means the auditor can accept a higher risk of not detecting material misstatements during the audit process, potentially leading to less substantive evidence being gathered. Audit risk is indeed a variable in the model, reflecting the auditor's acceptable level of overall risk that material misstatements may not be detected. The audit risk model helps auditors decide how much and what type of evidence to gather to keep audit risk at an acceptable level.

The Audit Risk Model Is a Theoretical Model Designed to Guide