Introduction:
It is about the degree of risk involved in the prudence shown the auditor while ascertaining the sufficiency and appropriateness of audit evidence, which might result into material statement if prudence is not displayed. It also wants us to explain that if there is a high risk factor decision and low risk decision is to be taken, how sufficiency and appropriateness goes in contrast and the materiality aspect is changed.
To explain:
It is about the importance of sufficiency and appropriateness factor of auditevidence, which may result into material misstatement related with that client. It is also about the contrast factor of difference in sufficiency and appropriateness, if it is the case of a high risk decision or a low risk decision.
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Auditing: A Risk Based-Approach to Conducting a Quality Audit
- Which of the following statements is true regarding the sufficiency of evidence needed to test an account? a. Evidence sufficiency is a measure of evidence quality. b. Evidence sufficiency is affected by the quality of evidence. c. A relationship does not exist between evidence sufficiency and evidence quality. d. For a specific client, evidence sufficiency will be the same across all accounts.arrow_forwardWhy is the audit team more concerned with the risk of overreliance than with the risk of underreliance?arrow_forwardWhich of the following does not increase the need for sufficient appropriate auditevidence?(1) A lower acceptable level of detection risk(2) An increase in the assessed control risk(3) A lower acceptable audit risk(4) A decrease in the assessed inherent riskarrow_forward
- Why are auditors more concerned with the risk of incorrect acceptance than the risk of incorrect rejection?arrow_forwardWhich of the following presumptions is correct about the reliability of evidential matter? a. To be reliable, evidential matter should be convincing rather than persuasive. O b. Reliability of evidential matter refers to the amount of corroborative evidence obtained. O c. Effective internal control provides more assurance about the reliability of evidential matter. O d. Information obtained indirectly from outside sources is the most reliable evidential matter.arrow_forwardEvidence that tends to make some fact in issue more or less likely than it would be without the evidence is called: A. Relevant evidence. B. Authenticated evidence. C. Direct evidence. D. Real evidence.arrow_forward
- What is the relationship between Evidence and Detection Risk?arrow_forwardContrast the liability issues and disclosure of errors. Does disclosure minimize the risk? Does the disclosure improve avoidable events?arrow_forwardstate the effect on planned evidence (increase or decrease) of changing each of 'AN INCREASE IN ACCEPTABLE AUDIT RISK' factor, while the other factors remain unchanged.arrow_forward
- Does the MM theory appear to be correct according to either empirical research or observations offirms’ actual behavior? How do assumptions affectyour conclusion about whether the MM theoryappears to be correct?arrow_forwardWhat are the advantages and disadvantages of an adverse auditarrow_forwardWhich of the following characteristics is not considered essential to audit evidence? a. Availability of evidence b. Reliability of evidence c. Sufficiency of evidence d. Relevance of evidencearrow_forward
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