Use the following information to answer the questions below:

The firm's policy is as follows:

Audit Risk Model

AR

=

RMM

x

DR

LOW

LOW

VERY LOW

LOW

MODERATE

MODERATE

LOW

HIGH

VERY LOW

LOW

HIGH

LOW

MODERATE

MODERATE

HIGH

LOW

LOW

HIGH

MODERATE

MODERATE

HIGH

HIGH

MODERATE

The auditor has planned an audit program for testing as follows:

• Materialityis$10M
• ARisLOW.
• RMMisMODERATE.
• DRisLOW.
• AR = RMM x DR,
• LOW = Moderate x LOW(Current setting by the audit team, based on information above.)

The following are theonlyavailable options for testing. The audit manager's initial choices are inboldface:

N/T/E

Option 1

Option 2

Option 3

Natureof principal audit procedure:

(a)Positive confirmation and vouching ofinvoices,

(b) positive confirmation only,

(c) Negative confirmation.

Extentof principal audit procedure:

(d) 25 invoices,

(e)100 invoices

(f) 200 invoices.

Timingof principal auditprocedure:

(g) October 31

(h) November 30

(i) December 31

Suppose that the engagement partner changes the plannedAR to MODERATE.RMM is LOW. What would be the effect on the audit procedures above- think about efficiency & effectiveness of the procedures:(Use the information above to answer.)

The effect on Nature?______________________________________________________________________.

Positive confirmation and vouching ofinvoices

Positive confirmation only

Negative confirmation

None of the above