Audit and Assurance 2025 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 400

Which factors might alter a risk assessment during an audit?

Changes in audit methodology

Auditor's departure from the firm

Changes in internal controls or discovered misstatements

The correct answer focuses on the changes in internal controls or the discovery of misstatements as significant factors that can alter a risk assessment during an audit. When auditors assess risk, they evaluate the effectiveness of an organization’s internal controls, which are designed to prevent, detect, and correct misstatements in financial reporting. If there are changes in internal controls, such as new processes being implemented or existing controls being found ineffective, it could significantly increase or decrease the risk of material misstatements.

Additionally, if misstatements are discovered during the audit, either through the auditor’s testing or reported by the company, this can also lead to a reassessment of risk. Discovering misstatements indicates weaknesses in the financial reporting process or internal controls, which would necessitate a higher risk assessment for those areas affected.

Looking at the other factors, while changes in audit methodology could introduce different approaches to risk assessment, they do not inherently change the risk associated with the organization's internal environment. Similarly, the departure of an auditor may impact the audit process but does not directly influence the underlying risk assessment related to the client’s financial environment. Lastly, the adoption of new accounting standards impacts how transactions and events should be reported, but the immediate effect on risk assessment requires

Get further explanation with Examzify DeepDiveBeta

Adoption of new accounting standards

Next Question

Report this question

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy