Audit Risk Model: Key Concepts & Phases Explained

Question 1

What is the systematic process of accumulating & evaluating evidence to assess the degree of correspondence?

Accepted Answer

Audit

Question 2

In which phase of the audit process do auditors accept the audit client?

Accepted Answer

Phase 1: Acceptance of audit client

Question 3

What is the key document that outlines the terms of the audit engagement?

Accepted Answer

Engagement letter

Question 4

Which of the following is NOT a part of the audit risk model formula?

Accepted Answer

Audit Opinion

Question 5

What is the formula for Detection Risk in the audit risk model?

Accepted Answer

DR = AAR / (IR x CR)

Question 6

Which phase of the audit process involves understanding the entity's environment?

Accepted Answer

Phase 2: Planning

Question 7

What is the acceptable audit risk?

Accepted Answer

AAR

Question 8

Which phase of the audit process involves assessing internal control?

Accepted Answer

Phase 2: Planning

Question 9

What is the risk of material misstatement?

Accepted Answer

RMM

Question 10

What is the key factor in determining the detection risk in the audit risk model?

Accepted Answer

Risk of Material Misstatement