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24) Using your knowledge of the relationships among acceptable audit risk, inherent risk, controlrisk, planned detection risk, performance materiality, and planned evidence, state the effect on planned evidence (increase or decrease) of changing each of the following factors, while the other factors remain unchanged.1.an increase in acceptable audit risk25) Describe the audit risk model and each of its components.7
- Acceptable audit risk is a measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued. It is influenced primarily by the degree to which external users will rely on the statements, the likelihood that a client will have financial difficulties after the audit report is issued, and the auditor's evaluation of management's integrity.- Inherent risk is a measure of the auditor's assessment of the likelihood that there are material misstatements in an account due to error or fraud before considering the effectiveness of internal control.- Control risk is a measure of the auditor's assessment of the likelihood that misstatements exceeding a tolerable amount in an account (segment) will be prevented or detected on a timely basis by the client's internal controls.26) The most important element of the audit risk model is control risk. F27) The audit risk model that must be used for planning audit procedures and evaluating audit results is: F28) If acceptable audit risk is low, and inherent risk and control risk are both low, then planned detection risk should be high. T29) If the audit assurance rate is 95%, then the level of acceptable audit risk is 5%. T30) A high detection risk equates to a low amount of audit evidence needed. F