Exam CISA topic 1 question 1154 discussion

A lower tolerance rate means a higher risk of discovery, which increases the risk of non-sampling.

Which of the following is a cause of non-sampling risk? Answer is D Non-sampling risk is the risk that the audit tests do not uncover existing exceptions in the sample. Two causes of this risk are: 1. Auditor failure to recognize exceptions. 2. Inappropriate or ineffective audit procedures. Representative Samples - JSU

B. Decreased tolerance rate: A decreased tolerance rate means that the auditor is willing to accept a lower level of misstatement in the financial statements. This could increase the likelihood of not detecting material misstatements and, therefore, increase non-sampling risk.

Non-sampling risk refers to the risk that arises from factors other than sampling errors. Among the options provided, poor knowledge of the audit process is most likely to increase non-sampling risk. If the audit team lacks adequate knowledge of the audit process, including a thorough understanding of the business, industry, and relevant audit standards, it increases the risk of making incorrect judgments, overlooking important details, and failing to identify material misstatements. These issues can lead to increased non-sampling risk because they are not related to errors arising solely from the use of sampling procedures.

D "Poor knowledge of the audit process," is MOST likely to increase non-sampling risk. Poor knowledge of the audit process: Poor knowledge of the audit process can significantly increase non-sampling risk. This includes risks related to the auditor's competence, understanding of the client's business, and the effectiveness of audit procedures performed. Poor knowledge of the audit process can lead to inadequate audit procedures and judgments.

I think its C. Materiality is a significant judgmental factor in audit planning and evaluation. Setting inappropriate materiality ratings may lead to errors in assessing the significance of misstatements, affecting the overall audit conclusion and increasing non-sampling risk.

This is D

D. Poor knowledge of the audit process