Home › CA Final › auditing › Risk Assessment and Internal Control › The Audit Risk Model implies that when materiali…
The Audit Risk Model implies that when materiality (M) is set lower, holding other risks constant, the auditor will:
AIssue an adverse opinion
BReduce DR by performing less work
CTighten DR by performing more extensive procedures
DConduct fewer procedures
Answer & Solution
Correct answer: D. Conduct fewer procedures
1. Lower materiality narrows tolerance for misstatement, so DR must be tighter.
2. Tighter DR is achieved through more extensive / more reliable procedures.
3. Fewer procedures or adverse opinion does not follow from lower materiality alone.
_Source: ICAI BoS CA Final Paper 3, Ch 3 "Risk Assessment and Internal Control"_
Related questions
The IT environment's impact on RoMM identification is BEST captured by:When responding to assessed risks at the financial-statement level, the auditor's overall Information & Communication component of internal control aims to ensure that:Management override of controls is, per SA 240:A change in entity's revenue recognition policy mid-year would prompt the auditor to:For controls operating over a long period, the auditor wants to rotate testing in alternatUnder SA 540, when management uses a model to estimate Expected Credit Loss (ECL) under InWhen designing further audit procedures, "Nature, Timing and Extent" (NTE) of procedures d