Audit Risk Model MCQs 2026

Which statement about Reassessment of risk is correct

1. Afixed at planning never changed✓
2. Bupdating risk assessment as audit progresses with new information✓
3. Conly after report issued✓
4. Dignore new fraud indicators✓

Fraud risk factor incentives is best described as

1. Aonly external audit fees✓
2. Bonly office rent✓
3. Conly employee birthdays✓
4. Dfinancial pressure opportunity and rationalization✓

Regarding Control risk assessment in Audit Risk Model, the accurate view is

1. Aalways maximum without testing✓
2. Balways zero without walkthrough✓
3. Cbased on design and operating effectiveness testing✓
4. Dignore control environment✓

Setting detection risk in the context of Audit Risk Model refers to

1. Ainversely related to assessed RMM for given audit risk✓
2. Bsame regardless of RMM✓
3. Chigher when RMM is high✓
4. Dzero always achievable✓

Regarding Risk at financial statement level in Audit Risk Model, the accurate view is

1. Arisk affecting FS as whole not limited to single assertion✓
2. Bonly invoice level always✓
3. Conly petty cash always✓
4. Dnever related to going concern✓

In Audit Risk Model, Combined risk assessment primarily means

1. Aonly ratio analysis without inquiry✓
2. Bconsidering both qualitative and quantitative factors✓
3. Conly inquiry without analytics✓
4. Dignore industry knowledge✓

In Audit Risk Model, Inherent risk primarily means

1. Arisk after control reliance only✓
2. Bonly detection failure✓
3. Conly sampling error✓
4. Dsusceptibility of assertion to misstatement before considering controls✓

A key aspect of Control risk is that it involves

1. Arisk that misstatement will not be prevented or detected by internal control✓
2. Balways zero if auditor exists✓
3. Csame as audit risk always✓
4. Donly fraud risk component✓

Regarding Risk of material misstatement in Audit Risk Model, the accurate view is

1. Aequals detection risk✓
2. Bequals audit risk only✓
3. Cexcludes inherent risk✓
4. Dcombination of inherent and control risk at assertion level✓

Assessing inherent risk factors in the context of Audit Risk Model refers to

1. Acomplexity judgment transactions and fraud susceptibility✓
2. Bonly counting paper reams✓
3. Conly office location✓
4. Donly logo colour✓

Regarding Management override of controls in Audit Risk Model, the accurate view is

1. Aimmaterial always✓
2. Bprevented by any IT system always✓
3. Csignificant fraud risk due to ability to bypass controls✓
4. Dnot relevant to audit✓

Which statement about Risk at assertion level is correct

1. Arisk attached to specific class of transactions or balance✓
2. Bonly entity level always✓
3. Conly audit firm level✓
4. Donly industry level without assertion✓

Audit Risk Model: Audit risk and materiality link can be defined as

1. Amateriality unrelated to risk✓
2. Bhigher materiality means more work always✓
3. Csame sample regardless of materiality✓
4. Dlower materiality implies lower acceptable audit risk for planning✓

Regarding Detection risk in Audit Risk Model, the accurate view is

1. Arisk auditor procedures will not detect misstatement that exists✓
2. Brisk management commits fraud only✓
3. Crisk of client bankruptcy only✓
4. Drisk of industry decline only✓