QUESTION 4: (10 Marks) (i) State the three steps in applying the audit risk model. (3 Marks)

(ii) State the Planning form of the Audit Risk Model (1 Mark)

(iii) State one action that an auditor can undertake to reduce Detection Risk. (1 Mark)

(iv)For each of the following independent situations, will the auditor increase (I) or decrease (D) Detection Risk? (2 Marks) Situation A Purchases were sent to suppliers without the required approvals. B The client decided to diversify and enter a new market.

(v) You are planning the audit of Green Pty Ltd and you are provided with the information below. What effect (if any) will this information have on your assessment of each of the three potential risk factors: Control Risk, Inherent Risk and Detection Risk? The options are: I = increase in the risk factor, D = decrease in the risk factor N = no change in the risk factor C= cannot determine on the basis of the information provided (3 Marks) Information: The client purchased a new software package for processing sales, but did not provide sufficient training for staff. When you asked management why this had happened, you were told that the client had overspent on the amount it had budgeted for a new product line it had developed. 9 Note: To answer this question, write the name of each risk factor followed by the letter corresponding to the risk assessment. For example, if you believe that for Detection Risk there is no change, write: Detection Risk-N