Question

ABC, Inc. is a privately owned business that sells medical product and devices to hospitals, clinics and the public. Certain changes have occurred in ABC, Inc. during the year undergoing the audit. Harker needs to evaluate the effect these changes have on audit risk. Audit risk at the financial statement level is influenced by the risk of material misstatement; which include factors related to management, the industry and the entity or a combination thereof. If an expert was hired to help determine the value of the ore content in ending materials inventory, what is the best possible effect on the audit?

Answer 1

The answer is a Decrease the acceptable level of detection risk

Step-by-step explanation:

An auditor may reduce substantive testing by relying on the assessments of inherent risk and control risk.

A low detection risk is a risk that the auditor fail or will fail to catch a material misstatement that is not caught by the client's internal controls. When the risk of material misstatement is high, the auditor should set the detection risk to a low level to ensure that audit risk remains low.