Below are eight independent risk factors: 1. The client lacks sufficient working capital to continue operations. 2. The company is privately owned. 3. The auditor has identified numerous material misstatements during prior year audit engagements. 4. The client is one of the industry's largest based on its size and market share. 5. Poor economy has casted more doubts on the collectability of accounts receivable. 6. The company has decreased the staff number at the Accounting department to cut costs. 7. The audit plan omits several necessary audit procedures. 8. The company has internal audit department which regularly perform internal audit of different departments operation. Identify which of the following audit risk model components relates most directly to each of the eight risk factors: *Acceptable audit risk * Control risk *Inherent risk * Planned detection risk For each of the above independent risk factors, discuss and assess the level of risk for the most related risk components and planned evidence as high, medium or low.

Question 2 Discuss what is low-balling in audit. There are criticisms on low-balling. How may it affect the audit risk model components and lead to negative effect on audit quality. What are your views?