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  • Of Substantive: Nature, Timing, & Extent Evidential Matter

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    Hazem El Sayed
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    1) The audit risk model is used to determine an acceptable level of detection risk based on an understanding of internal control design and an assessment of control risk combined with inherent risk. A higher detection risk may require less convincing evidence, while a lower detection risk requires more convincing evidence. 2) Substantive tests that are more effective, gather more competent evidence after year-end by verifying a larger number of transactions will result in a lower detection risk, while less effective tests that gather less competent evidence prior to year-end by verifying fewer transactions will result in a higher detection risk.

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    1) The audit risk model is used to determine an acceptable level of detection risk based on an understanding of internal control design and an assessment of control risk combined with inherent risk. A higher detection risk may require less convincing evidence, while a lower detection risk requires more convincing evidence. 2) Substantive tests that are more effective, gather more competent evidence after year-end by verifying a larger number of transactions will result in a lower detection risk, while less effective tests that gather less competent evidence prior to year-end by verifying fewer transactions will result in a higher detection risk.

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    4 views1 page

    Of Substantive: Nature, Timing, & Extent Evidential Matter

    Uploaded by

    Hazem El Sayed
    1) The audit risk model is used to determine an acceptable level of detection risk based on an understanding of internal control design and an assessment of control risk combined with inherent risk. A higher detection risk may require less convincing evidence, while a lower detection risk requires more convincing evidence. 2) Substantive tests that are more effective, gather more competent evidence after year-end by verifying a larger number of transactions will result in a lower detection risk, while less effective tests that gather less competent evidence prior to year-end by verifying fewer transactions will result in a higher detection risk.

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    © All Rights Reserved
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    1

    Nature, Timing, & Extent of Evidential Matter


    (Audit risk model used to determine acceptable level of detection risk
     Understanding of design of internal control used to assess level of control risk

     Assessed level of control risk, along with inherent risk, used in audit risk model to
    deter-
    mine level of detection risk that will provide acceptable level of audit risk

     Resulting acceptable level of detection risk may be high1tess \ onvincing evidence is


    re-
    quired

     Resulting acceptable level of detection risk may be low-moreyconvincing evidence is


    required
    2

    Focus on
    Evidence - Module 3 88

    Effects of· Substantive Tests on Detection Risk

    Lower Detection Risk Higher Detection Risk


    General
    Effectiveness
    More effective substantive tests Less effective substantive tests
    Nature

    Gather evidential matter that is more Gather evidential matter that is less com-
    competent petent
    Timing
    Gather evidence after year-end Gather evidence prior to year-end (interim)
    Extent
    Verify a larger number of transactions Verify a smaller number of transactions or
    or components of the account balance components of the account balance

    Focus on
    Evidence - Module 3
    89

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