The audit program needs to be tailored, based on the planned level of detection risk to be achieved.

Question

BlackTom AI · Accepted Answer

The question concerns how an audit program should be shaped in relation to detection risk planning. 
Option 1: True. This statement aligns with auditing standards which emphasize tailoring the audit program to the planned level of detection risk to be achieved. When auditors set a lower detection risk (a higher risk of not detecting a material misstatement), they typically expand procedures, increase sampling, or perform more substantive testing, thereby tailoring the program to achieve the desired risk level. 
Option 2: False. Saying that the audit program cannot be tailored based on detection risk would conflict with the fundamental risk-based approach in auditing. In practice, the entire audit plan and procedures are adjusted according to assessed detection risk as part of designing appropriate work efforts and evidence gathering. This option ignores the core principle of calibrating procedures to the risk profile. 
In evaluating the two statements, the first option captures the essence of risk-based auditing: the audit program is not one-size-fits-all but is shaped by the level of detection risk the auditors are willing to accept and the amount of evidence required to support conclusions. The second option rests on a misconception that detection risk does not influence the nature, timing, and extent of procedures. 
Therefore, the reasoning supports the view that tailoring the audit program to the planned detection risk is consistent with standard auditing practice and risk management principles.

The audit program needs to be tailored, based on the planned level of detection risk to be achieved.

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