Question

Which of the following statements is false regarding the nature, timing, and extent of risk responses?

a. When the risk of material misstatement is low, the auditor conducts the audit procedures closer to year-end, on an unannounced basis, and includes more elements of unpredictability in the procedures.
b. The nature of risk response refers to the types of audit procedures applied given the nature of the account balance and the most relevant assertions regarding that account balance.
c. The extent of risk response refers to the sufficiency of evidence that is necessary given the client's assessed risks, materiality, and the acceptable level of audit risk.
d. The timing of risk response refers to when the auditor performs the audit procedures.

Answer 1

The false statement is option a. The auditor conducts the audit procedures closer to year-end, on an unannounced basis, and includes more elements of unpredictability in the procedures when the risk of material misstatement is high, not low.

Step-by-step explanation:

The false statement regarding the nature, timing, and extent of risk responses is option a. The auditor conducts the audit procedures closer to year-end, on an unannounced basis, and includes more elements of unpredictability in the procedures when the risk of material misstatement is high, not low. In cases where the risk is low, the auditor may apply audit procedures at an interim date rather than waiting until year-end.

Option b is true. The nature of risk response involves selecting the appropriate audit procedures based on the nature of the account balance and the relevant assertions.

Option c is true. The extent of risk response refers to the sufficiency of evidence needed to address the assessed risks, materiality, and acceptable level of audit risk.

Option d is true. The timing of risk response refers to when the auditor performs the audit procedures.