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18:15 Wed Feb 5 71% e.centennialcollege.ca - Private ACC1742 WZUZU maividual Assignment.docx Individual Assignment (IA) for ACCT 742, Winter 2020 Stephen Hudovernik - The Business School, Centennial College Assignment: Reply as directed to the following three questions. Ensure you provide responses in your own words (to demonstrate an ability to communicate auditing concepts). Question 1: Consider the below chart from our textbook (Auditing: An International Approach with Connect access, 8th Edition Smieliauskas and Bewley (McGraw Hill Education)) on page 342. Impact of Assessed Levels of Inherent and Control Risks on Detection Risk and Planned Substantive Evidence Gathering ASSESSED CONTROL RISK Risk is high Risk is not high . Controls are weak or auditor decided . Controls are effective and auditor not to test them. confirmed this by testing them ASSESSED INHERENT RISK Risk is high. Accepted detection risk must Accepted detection risk will be be low. medium. Highly persuasive substantive Moderately persuasive substantive evidence is needed to obtain evidence should be obtained. assurance Risk is not Accepted detection risk will be High detection risk can be high medium. high. B Moderately persuasive substantive A relatively low level of substantive evidence should be obtained. evidence can be used to support reasonable assurance. Situation "A" is when assessed inherent risk and control risk are both high Situation "B" is when assessed inherent risk and control risk are both low Required: Explain the following: a) What is the Audit Risk Model, explain it and the variables that are part of it? b) Which of Inherent Risk, Control Risk and Detection Risk does an auditor control? Explain why the auditor does or does not for each of those Risks. c) How does Audit Risk change with changes in each of the variables in (a) above? d) Referencing the Audit Risk Model, how would an auditor analyze and decide on how to set the Detection Risk for an engagement in both situations "A" and "B". ACCT742 W2020 Individual Assignment. docx 2 of 5