The auditor should consider misstatements of less than materiality levels, which could influence the economic decisions of the users. The fact that they put materiality into use is the fact that initially, they came up with a thresh hold with which they compared the different amounts to. The totals were ignored and assumed to have been as a result of small errors such as miscellaneous omissions.
Question 4:
In the case of Alpine, the audit personnel have tried to exercise preliminary audit procedures to find out any errors in account balances and material misstatements in the financial statements.
Audit Risk model is, AR = RMM X DR
Audit Risk = Risk of Material Misstatement X Detection Risk
Risk of material misstatement is the product of inherent risk and control risk. Detection risk is the product of test of details risk substantive analytical procedure risk.
Here, Inherent risk is high, Control risk is moderate and Detection risk is high. Therefore, audit risk cannot be low. The auditors need to apply the risk model again. Factors should be taken into consideration, which affect