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Audit Risk Authoritative Literature Help Bestwood Furniture. Inc., a nissuer that produces wood furniture, is undergoing a Year 2 audit. The situations in the a table below describe Bestwood made duri Year 2 that or may not e to audit risk. Audit risk is function of (1) the risks of material misstatement, the components of which are inherent risk and control risk. and detection risk. For each situation, select from the list provided the effect, if any, that the situation has on a specific element of audit risk for the Year 2 audit. A choice may be used once, more than once, or not at all. Choices Effect on component A) Decreases control risk of audit risk Situation B) Decreases detection risk 1. During Year 2, the company instituted a new procedure C) Decreases inherent risk whereby the internal audit function distributes payroll checks to employees for selected payroll cycles. D) Increases control risk 2. In Year 2, the auditor noted that the company's newly E) increases detection risk hired purchasing agent was not obtaining competitive F) Increases inherent risk bids for all major purchase requisitions. 3. Early in Year 2, the company extended its existing G No effect on audit risk program on some of its major products in an effort to increase revenue. 4. At the beginning of Year 2, the company changed insurance carriers for the fire insurance on its building 5. During Year 2, the company repaid a floating-interest- rate loan on which it had purchased a derivative as a hedge. The hedge was also sold