For each of the following independent statements, state whether you agree or disagree with the statement and fully explain your answer. Required

1. Each of the following changes (considered individually, and holding other things constant) can be expected to decrease the level of detection risk associated with the auditor's substantive tests:

   • decreasing materiality

   • reducing the level of audit risk

2. Auditing standards require that if an auditor plans to assess control risk as high, internal controls must be of higher quality and the auditor must perform more extensive tests of such controls.

3. A company that has a high business risk would suggest that the auditor should reduce the level of audit risk to provide for greater assurance that the audited financial statements would not be materially misstated.

4. When the auditor assesses the risk of material misstatement as low, detection risk would be assessed as high.