Excellent question. I got deceived.
As the acceptable level of detection risk increases, an auditor may change the:
A.
assessed level of control risk from below the maximum to the maximum level.
B.
assurance provided by tests of controls by using a larger sample size than planned.
C.
timing of substantive tests from year-end to an interim date.
Incorrect D.
nature of substantive tests from a less effective to a more effective procedure.
You answered D. The correct answer is C.
The key to this question is the wording “the acceptable level of detection risk increases.” This means the auditor is placing more reliance on the entity's internal control and, thus, requires less assurance from substantive testing. This allows the nature, timing, and extent of substantive tests to be modified and, in this case, lessened. As a result, timing of substantive tests could be shifted from year-end to an interim date.
Terms
Assurance
Audit Sampling
Control Risk
Detection Risk
Effectiveness
Extent
Interim Period
Nature
Reliance
Substantive Procedures
Test of Controls
Timing of Audit Procedure
References
3311.05
3311.15
3311.16
Authorities
This question has no assigned authorities.
Question #: 407 Category: 3A1 Develop Overall Responses to Risks Identified and Use the Risks of Material Misstatement to Drive the Nature, Timing, and Extent of Further Audit Procedures Question 18 of 30
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