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For each event described below, indicate the effect on control risk (CR), inherent risk (IR), acceptable audit risk (AAR) and planned evidence (PE), using the dropdown menu: increase (I), decrease (D), no change (N), or cannot determine C.

Dropdown Menu for each question: I, D, N, C

Please answer all 4 parts for all questions 1-8

AutoSave OFF HESvo = wa Ch. 9 Risk model HW F21 (1) Home Insert Draw Page Layout Formulas Data Review View Tell me Calibri (Body) 11 v Ai ab Wrap Text v General Paste B I V V V Merge & Center v $ v % ) 60 .00 .00 20 FC F10 4 x fx A B D E F G H j K L M N Ch. 9 Risk Model Problem w NP Name: For each event described below, indicate the effect on control risk (CR), inherent risk (IR), acceptable audit risk (AAR) and planned evidence (PE), using the dropdown menu: increase (t), decrease (D), no change (N), or cannot determine C. 4 5 Event(s) CR IR AAR PE 6 7 Client management materially increased long- term debt. 8 1. N N D 1 9 After evaluating and testing controls, the auditor decided that controls were less effective than planned. 10 2. . 11 I Indicators of financial condition improved from the prior year. 12 3. zo 13 The company began international sales in Spain and entered into exchange contracts to minimize currency exchange risks. 14 4. 15 The company changed from privately held to publicly held. 5. 16 17 Management is planning to sell the business. As a result, several key employees have left the business. 18 6. 19 There has been a change in several key management personnel. The company's financial situation has deteriorated and it is seeking additional bank financing. Gross margin has increased significantly while accounts receivable turnover has slowed. 20 7. 21 You find controls over inventory have improved compared to the prior year. You observe that due to technological changes, the client's inventory may be somewhat obsolete. 8. 22 23 Ch. 9 HW Sheet2

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