Decreases detection risk Increases inherent risk 1. In Year 2, the auditor noted that the company's newly hired purchasing agent was not obtaining competitive bids for all major purchase requisitions as required. 2. Early in Year 2, the company expanded its warranty program to cover additional major products in an effort to increase sales. 3. The audit partner decided that the audit team needed to perform additional tests of detail over payroll in addition to the substantive analytical procedures done last year over payroll. 4. In Year 2, the company budgeted for the creation of an internal audit department, which will commence operations in Year 3. 5. In January Year 2, the corporate controller implemented a supervisory review of all internally prepared reconciliations. The auditor determined that the controls are designed and operating effectively for the period. Decreases inherent risk Decreases control risk Increases detection risk Scroll down to complete all parts of this task. Bestwood Furniture, Inc., a nonissuer that produces wood furniture, is undergoing a Year 2 audit. The situations below describe changes made during Year 2 that may or may not contribute to audit risk. For each situation, select the impact, if any, that the situation has on a specific component of audit risk for the Year 2 audit. Selections may be used once, more than once, or not at all. Consider each situation independently. Situation Impact on component of audit risk Decreases detection risk 1. in Year 2, the auditor noted that the company's newly hired purchasing agent was not obtaining competitive bids for all major purchase requisitions as required: 2. Early in Year 2, the company expanded its warranty program to cover additional major products in an effort to increase sales. 3. The audit partner decided that the audit team needed to perform additional tests of detail over payroll in addition to the substantive analytical Increases inherent risk Decreases inherent risk 1 2 3 4 ar 2, the auditor noted that the ny's newly hired purchasing agent was aining competitive bids for all major Decreases detection risk se requisitions as required. in Year 2, the company expanded its Select an option below nty program to cover additional major Incre acts in an effort to increase sales. Decreases control risk audit partner decided that the audit team Decreases detection risk ed to perform additional tests of detail over Sil in addition to the substantive analytical O Decreases inherent risk edures done last year over payroll Increases control risk Year 2, the company budgeted for the ution of an internal audit department, which Decr Increases detection risk commence operations in Year 3. Increases inherent risk January Year 2, the corporate controller blemented a supervisory review of all ernally prepared reconciliations. The auditor RESET termined that the controls are designed and erating effectively for the period. Dec Incre CANCEL ACCEPT