@NYCaccountant – One thing I second guessed myself on was if inherent or control risk change does detection risk always have to change inversely?. The example below is what I really have trouble with. I don't know how to take these questions and determine what effect it has on audit risk.
Bestwood Furniture, Inc., a nonissuer that produces wood furniture, is undergoing a year 2 audit. The situations in the table below describe changes Bestwood made during year 2 that may or may not contribute to audit risk. For each situation, double-click in the associated shaded cell and select from the list provided the impact, if any, that the situation has on a specific component of audit risk for the year 2 audit. A selection may be used once, more than once, or not at all.
During year 2, the company instituted a new procedure whereby the internal audit department distributes payroll checks to employees for selected payroll cycles.
In year 2, the auditor noted that the company's newly hired purchasing agent was not obtaining competitive bids for all major purchase requisitions.
Early in year 2, the company extended its existing warranty program on some of its major products in an effort to increase revenue.
The answers are decreases control risk, increases control risk, and increases inherent risk.
These are relatively easy compared to what I've seen on the exam but these are the types of questions that give me issues.
REG - 78
BEC - 74, 67, 69, 69, 70, 79
FAR - 76
AUD - 69, 69, 69, 74, 85
Licensed Louisiana CPA
“You never fail until you stop trying.”
― Albert Einstein
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