In connection with the preliminary planning for the audit of XYZ Company, the auditors have determined that they are willing to accept an overall risk of material misstatement (audit risk) of 8% for the customer receivables account. Further, they have determined that overall inherent risk is 75%. In addition, they believe that the internal control system will detect material misstatements 80% of the time and fail to detect 20% of the time. Based on these facts, (and using the audit risk equation) what percentage amount should the auditors set for detection risk? Type your answer without a decimal point. For example - type XX and NOT .XX. Round to the nearest whole percent. Answer: 13 Question 8 0/2 points Assume that you planned the audit estimating that the internal control system would detect material misstatements 50% of the time and XYZ Company. You have now performed tests of internal controls and have determined that the internal control system will detect material misstatements 70% of the time. Will this result require an increase, decrease or the same amount of substantive testing? 1) Decrease. 2) Same amount of substantive testing. 3) Increase
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