Question 1

Which of the following are examples of fraud risk factors?

Accepted Answer

A) Incentives and pressures to commit a fraud, 
B) Opportunities to perpetrate a fraud 
C) Attitudes and rationalizations used to justify committing fraud 
D) Auditors working without the client's previous year records 
A) Incentives and pressures to commit a fraud, 
B) Opportunities to perpetrate a fraud 
C) Attitudes and rationalizations used to justify committing fraud 
D) Auditors working without the client's previous year records

Question 2

What must happen before planning the audit and implementing the phase of risk assessment?

Accepted Answer

A) The client acceptance or continuation decision has to be made 
B) The risk response phase has to be completed 
C) The reporting phase must be undertaken 
D) The audit strategy must be planned 
A) The client acceptance or continuation decision has to be made 
B) The risk response phase has to be completed 
C) The reporting phase must be undertaken 
D) The audit strategy must be planned

Question 3

In an analysis by Eilifsen and Messier (2015), of the eight largest U.S.public accounting firms in the study, _______ firms revealed that they use "income before income taxes" as the primary benchmark for determining planning materiality.

Accepted Answer

A) seven 
B) six 
C) five 
D) four 
A) seven 
B) six 
C) five 
D) four

Question 4

Which phase helps improve the efficiency and effectiveness of the audit?

Accepted Answer

A) The risk assessment phase 
B) The risk response phase 
C) The reporting phase 
D) The audit strategy phase 
A) The risk assessment phase 
B) The risk response phase 
C) The reporting phase 
D) The audit strategy phase

Question 5

An example of fraudulent financial reporting is _______.

Accepted Answer

A) timing differences such as bringing forward the recognition of revenues and delaying the recognition of expenses 
B) writing checks to fictitious vendors 
C) using company cars for personal use 
D) theft of inventory by employees 
A) timing differences such as bringing forward the recognition of revenues and delaying the recognition of expenses 
B) writing checks to fictitious vendors 
C) using company cars for personal use 
D) theft of inventory by employees

Question 6

The auditor can set detection risk as high if _________.

Accepted Answer

A) inherent risk and control risk are low 
B) inherent risk and control risk are high 
C) inherent risk is low and control risk is high 
D) inherent risk is high and control risk is low 
A) inherent risk and control risk are low 
B) inherent risk and control risk are high 
C) inherent risk is low and control risk is high 
D) inherent risk is high and control risk is low

Question 7

The audit risk model is presented as _______.

Accepted Answer

A) AR = f (IR * CR * DR) 
B) AR = f (IR + CR + DR) 
C) AR = f (IR + CR - DR) 
D) AR = f (IR * CR) / DR 
A) AR = f (IR * CR * DR) 
B) AR = f (IR + CR + DR) 
C) AR = f (IR + CR - DR) 
D) AR = f (IR * CR) / DR

Question 8

An audit strategy is developed at the ________ level.

Accepted Answer

A) account or assertion 
B) disclosure or materiality 
C) financial statement 
D) materiality or assertion 
A) account or assertion 
B) disclosure or materiality 
C) financial statement 
D) materiality or assertion

Question 9

Developing an audit strategy is typically accomplished in the _______.

Accepted Answer

A) risk assessment phase 
B) risk response phase 
C) reporting phase 
D) audit strategy phase 
A) risk assessment phase 
B) risk response phase 
C) reporting phase 
D) audit strategy phase

Question 10

When would auditors increase the amount of detailed audit procedures used to test the year-end account balances and transactions from throughout the year?

Accepted Answer

A) When the detection risk is low 
B) When the inherent risk is low 
C) When the control risk is low 
D) When the inherent risk in high 
A) When the detection risk is low 
B) When the inherent risk is low 
C) When the control risk is low 
D) When the inherent risk in high

Question 11

The final phase of the audit involves _______.

Accepted Answer

A) drawing conclusions based upon the evidence gathered and arriving at an opinion about the fair presentation of the financial statements 
B) detailed testing of internal controls, transactions, account balances, and disclosures the auditors have determined to be at high risk of material misstatement 
C) planning the audit by assessing risk to reduce audit risk to an acceptably low level 
D) gaining an understanding of the client and identifying factors that may impact the risk of a material misstatement occurring in the financial statements 
A) drawing conclusions based upon the evidence gathered and arriving at an opinion about the fair presentation of the financial statements 
B) detailed testing of internal controls, transactions, account balances, and disclosures the auditors have determined to be at high risk of material misstatement 
C) planning the audit by assessing risk to reduce audit risk to an acceptably low level 
D) gaining an understanding of the client and identifying factors that may impact the risk of a material misstatement occurring in the financial statements

Question 12

If management is preoccupied with meeting specific accounting numbers, this is a negative factor that should influence client acceptance and retention and is associated with _______.

Accepted Answer

A) the integrity of management 
B) competence issues within the audit firm 
C) independence issues within the audit firm 
D) special circumstances and unusual risks 
A) the integrity of management 
B) competence issues within the audit firm 
C) independence issues within the audit firm 
D) special circumstances and unusual risks

Question 13

Timing differences such as bringing forward the recognition of revenues and delaying the recognition of expenses is an example of _______.

Accepted Answer

A) fraudulent financial reporting 
B) performance materiality 
C) planning materiality 
D) balance sheet benchmarks 
A) fraudulent financial reporting 
B) performance materiality 
C) planning materiality 
D) balance sheet benchmarks

Question 14

Which of the following is a positive factor influencing client acceptance and retention with respect to special circumstances and unusual risks?

Accepted Answer

A) There are minimal regulatory reporting requirements. 
B) There are significant regulatory reporting requirements with close monitoring by regulators. 
C) The client voices significant concerns about the scope of audit work. 
D) The client is experiencing profitability issues, weak cash flows, and is close to violation of debt covenants. 
A) There are minimal regulatory reporting requirements. 
B) There are significant regulatory reporting requirements with close monitoring by regulators. 
C) The client voices significant concerns about the scope of audit work. 
D) The client is experiencing profitability issues, weak cash flows, and is close to violation of debt covenants.

Question 15

In order to maintain professional skepticism, an auditor must also maintain _______.

Accepted Answer

A) independence from management 
B) support of management's questionable assumptions 
C) situational reliability 
D) support of questionable financial disclosures 
A) independence from management 
B) support of management's questionable assumptions 
C) situational reliability 
D) support of questionable financial disclosures

Question 16

Auditors make decisions about the extent and timing of detailed testing of account balances and transactions during the ________phase of the audit.

Accepted Answer

A) risk response 
B) audit strategy 
C) reporting 
D) risk assessment 
A) risk response 
B) audit strategy 
C) reporting 
D) risk assessment

Question 17

A team of auditors is gathering less evidence than is necessary, or evidence that is the easiest to obtain, rather than obtain evidence that is the most reliable and relevant.Such a lack of professional skepticism could be indicative of the team's ______.

Accepted Answer

A) workload 
B) culture 
C) size 
D) monitoring 
A) workload 
B) culture 
C) size 
D) monitoring

Question 18

What is performance materiality?

Accepted Answer

A) Amount or amounts set by the auditors at less than the materiality level for particular classes of transactions, account balances, or disclosures 
B) Information or misstatements that impact a user's decision-making process for a reason other than its magnitude 
C) Information or misstatements that exceed the magnitude of an auditor's preliminary materiality assessment, which is a percentage of an appropriate benchmark 
D) None of these options are correct. 
A) Amount or amounts set by the auditors at less than the materiality level for particular classes of transactions, account balances, or disclosures 
B) Information or misstatements that impact a user's decision-making process for a reason other than its magnitude 
C) Information or misstatements that exceed the magnitude of an auditor's preliminary materiality assessment, which is a percentage of an appropriate benchmark 
D) None of these options are correct.

Question 19

Which of the following could exhibit materiality?

Accepted Answer

A) Information that is misstated 
B) Information that is omitted but should be disclosed 
C) Information that is disclosed but should be omitted 
D) Information that is accurately stated but redundant 
A) Information that is misstated 
B) Information that is omitted but should be disclosed 
C) Information that is disclosed but should be omitted 
D) Information that is accurately stated but redundant

Question 20

Which of the following would be least likely to help you assess the integrity of management?

Accepted Answer

A) Interviews with human resources about its long-term disability provider. 
B) Interviews about the reputation of the client, its management, directors, and key stakeholders with the previous auditor. 
C) Interviews with management about its attitude to risk exposure. 
D) Interviews with the prior auditor about the client's reasons for switching audit firms, if the company was previously audited. 
A) Interviews with human resources about its long-term disability provider. 
B) Interviews about the reputation of the client, its management, directors, and key stakeholders with the previous auditor. 
C) Interviews with management about its attitude to risk exposure. 
D) Interviews with the prior auditor about the client's reasons for switching audit firms, if the company was previously audited.

Which of the following are examples of fraud risk factors?

What must happen before planning the audit and implementing the phase of risk assessment?

In an analysis by Eilifsen and Messier (2015), of the eight largest U.S.public accounting firms in the study, _______ firms revealed that they use "income before income taxes" as the primary benchmark for determining planning materiality.

Which phase helps improve the efficiency and effectiveness of the audit?

An example of fraudulent financial reporting is _______.

The auditor can set detection risk as high if _________.

The audit risk model is presented as _______.

An audit strategy is developed at the ________ level.

Developing an audit strategy is typically accomplished in the _______.

When would auditors increase the amount of detailed audit procedures used to test the year-end account balances and transactions from throughout the year?

The final phase of the audit involves _______.

If management is preoccupied with meeting specific accounting numbers, this is a negative factor that should influence client acceptance and retention and is associated with _______.

Timing differences such as bringing forward the recognition of revenues and delaying the recognition of expenses is an example of _______.

Which of the following is a positive factor influencing client acceptance and retention with respect to special circumstances and unusual risks?

In order to maintain professional skepticism, an auditor must also maintain _______.

Auditors make decisions about the extent and timing of detailed testing of account balances and transactions during the ________phase of the audit.

A team of auditors is gathering less evidence than is necessary, or evidence that is the easiest to obtain, rather than obtain evidence that is the most reliable and relevant.Such a lack of professional skepticism could be indicative of the team's ______.

What is performance materiality?

Which of the following could exhibit materiality?

Which of the following would be least likely to help you assess the integrity of management?

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing the Purchases Cycle and Payroll Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters

Exam 3: Risk Assessment Part Iaudit Risk and Audit Strategy

Which of the following are examples of fraud risk factors?

What must happen before planning the audit and implementing the phase of risk assessment?

In an analysis by Eilifsen and Messier (2015), of the eight largest U.S.public accounting firms in the study, _______ firms revealed that they use "income before income taxes" as the primary benchmark for determining planning materiality.

Which phase helps improve the efficiency and effectiveness of the audit?

An example of fraudulent financial reporting is _______.

The auditor can set detection risk as high if _________.

The audit risk model is presented as _______.

An audit strategy is developed at the ________ level.

Developing an audit strategy is typically accomplished in the _______.

When would auditors increase the amount of detailed audit procedures used to test the year-end account balances and transactions from throughout the year?

The final phase of the audit involves _______.

If management is preoccupied with meeting specific accounting numbers, this is a negative factor that should influence client acceptance and retention and is associated with _______.

Timing differences such as bringing forward the recognition of revenues and delaying the recognition of expenses is an example of _______.

Which of the following is a positive factor influencing client acceptance and retention with respect to special circumstances and unusual risks?

In order to maintain professional skepticism, an auditor must also maintain _______.

Auditors make decisions about the extent and timing of detailed testing of account balances and transactions during the ________phase of the audit.

A team of auditors is gathering less evidence than is necessary, or evidence that is the easiest to obtain, rather than obtain evidence that is the most reliable and relevant.Such a lack of professional skepticism could be indicative of the team's ______.

What is performance materiality?

Which of the following could exhibit materiality?

Which of the following would be least likely to help you assess the integrity of management?

Introduction and Overview of Audit and Assurance

Professionalism, Ethics and Legal Liability

Risk Assessment Part Iiunderstanding the Client

Audit Evidence

Understanding of the Clients System of Internal Controls

Data Analyticsoverview and Application

Risk Responseperforming Tests of Controls

Risk Responseperforming Substantive Procedures

Risk Responseaudit Sampling for Substantive Testing

Auditing the Revenue Cycle

Auditing the Purchases Cycle and Payroll Cycle

Auditing Cash, Inventory, Investing and Financing Activities

Completing the Audit

Reporting on the Audit

Filters