Chapter 7, Problem 34RSCQ

a.

To determine

Introduction: Audit risk functions with risk of material misstatement and detection risk. It may occur at assertion level or financial statement level. At assertion level risk is of three types - control, inherent and detection. At financial statement level, it related to financial statements wholly or affects many assertions in the financial statements.

To find: Relationship between the level of riskiness of the client and level of misstatement in an account balance that an auditor would consider material.

b.

To determine

Introduction: Audit risk functions with risk of material misstatement and detection risk. It may occur at assertion level or financial statement level. At assertion level risk is of three types - control, inherent and detection. At financial statement level, it related to financial statements wholly or affects many assertions in the financial statements.

To find: Effect of auditor’s characteristics on professional judgments about materiality.

c.

To determine

Introduction: Audit risk functions with risk of material misstatement and detection risk. It may occur at assertion level or financial statement level. At assertion level risk is of three types - control, inherent and detection. At financial statement level, it related to financial statements wholly or affects many assertions in the financial statements.

To find: Comparison of more skeptical auditor with less skeptical auditor for making the materially judgment in part a.