Answered step by step
Verified Expert Solution
Question
1 Approved Answer
In connection with the preliminary planning for the audit of XYZ Company, the auditors have determined that they are willing to accept an overall risk
In connection with the preliminary planning for the audit of XYZ Company, the auditors have determined that they are willing to accept an overall risk of material misstatement (audit risk) of 8% for the customer receivables account. Further, they have determined that overall inherent risk is 75%. In addition, they believe that the internal control system will detect material misstatements 80% of the time and fail to detect 20% of the time. Based on these facts, (and using the audit risk equation) what percentage amount should the auditors set for detection risk? Type your answer without a decimal point. For example - type XX and NOT .XX. Round to the nearest whole percent. Answer: 13 Question 8 0/2 points Assume that you planned the audit estimating that the internal control system would detect material misstatements 50% of the time and XYZ Company. You have now performed tests of internal controls and have determined that the internal control system will detect material misstatements 70% of the time. Will this result require an increase, decrease or the same amount of substantive testing? 1) Decrease. 2) Same amount of substantive testing. 3) Increase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started