Question 1

Which of the following is an impediment to the application of professional skepticism?

Accepted Answer

A) Workload of the auditors 
B) Lack of confidence in management 
C) A trend to keep audit costs high 
D) A sole focus on the audit engagement and no other services 
A) Workload of the auditors 
B) Lack of confidence in management 
C) A trend to keep audit costs high 
D) A sole focus on the audit engagement and no other services

Question 2

The process used when developing an audit strategy at the account or assertion level begins with identifying inherent risks at the account or assertion level.The second step is to _______.

Accepted Answer

A) determine whether an internal control can mitigate the risk factor 
B) increase the extent of detailed substantive procedures performed at year-end 
C) perform less extensive detailed substantive procedures at interim 
D) determine whether insurance can be purchased to eliminate internal controls 
A) determine whether an internal control can mitigate the risk factor 
B) increase the extent of detailed substantive procedures performed at year-end 
C) perform less extensive detailed substantive procedures at interim 
D) determine whether insurance can be purchased to eliminate internal controls

Question 3

Identification of risk factors is typically associated with what phase 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 4

An example of misappropriation of assets is _______.

Accepted Answer

A) employees remaining on the payroll after ceasing employment 
B) improper asset valuation 
C) fictitious sales 
D) unrecorded liabilities 
A) employees remaining on the payroll after ceasing employment 
B) improper asset valuation 
C) fictitious sales 
D) unrecorded liabilities

Question 5

Which of the following statements are true?

Accepted Answer

A) The auditing standards require specific percentages be applied as benchmarks in setting planning materiality. 
B) For both private and publicly traded companies, the primary users of financial statements are the stockholders. 
C) Auditors rely heavily on their professional judgment in setting planning materiality 
D) Audit firms do not vary in the method they use to set planning materiality in the risk assessment phase. 
A) The auditing standards require specific percentages be applied as benchmarks in setting planning materiality. 
B) For both private and publicly traded companies, the primary users of financial statements are the stockholders. 
C) Auditors rely heavily on their professional judgment in setting planning materiality 
D) Audit firms do not vary in the method they use to set planning materiality in the risk assessment phase.

Question 6

What is control risk?

Accepted Answer

A) The risk that a client's internal controls will not prevent or detect a material misstatement on a timely basis. 
B) The assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration 
C) An audit risk assessment that involves the identification of accounts and related assertions most at risk of material misstatement 
D) A risk that management's assertion, or claim, that recorded inventory exists 
A) The risk that a client's internal controls will not prevent or detect a material misstatement on a timely basis. 
B) The assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration 
C) An audit risk assessment that involves the identification of accounts and related assertions most at risk of material misstatement 
D) A risk that management's assertion, or claim, that recorded inventory exists

Question 7

An evaluation of the results of the detailed testing in light of the auditor's understanding of the client and forming an opinion on the fair presentation of the client's financial statements is associated with what phase of the audit?

Accepted Answer

A) The reporting phase 
B) The response phase 
C) The risk assessment phase 
D) The risk of material misstatement phase 
A) The reporting phase 
B) The response phase 
C) The risk assessment phase 
D) The risk of material misstatement phase

Question 8

Which of the following is an example of an incentive or pressure that increases the risk of fraud?

Accepted Answer

A) The client operates in a highly competitive industry 
B) The number of job offers that the company makes per year 
C) The due date of employee contracts 
D) The amount of stock options for lower-level managers 
A) The client operates in a highly competitive industry 
B) The number of job offers that the company makes per year 
C) The due date of employee contracts 
D) The amount of stock options for lower-level managers

Question 9

What are the benefits of considering management assertions in the audit process?

Accepted Answer

A) Assertions help guide the procedures conducted by auditors. 
B) Assertions guarantee that fraud will be found. 
C) It is possible to eliminate audit risk when assertions are used. 
D) Assertions eliminate the risk that inventory will be stolen. 
A) Assertions help guide the procedures conducted by auditors. 
B) Assertions guarantee that fraud will be found. 
C) It is possible to eliminate audit risk when assertions are used. 
D) Assertions eliminate the risk that inventory will be stolen.

Question 10

After determining materiality, which of the following is NOT a step for the auditor to follow?

Accepted Answer

A) Determine who is most likely to commit fraud 
B) Determine the type and extent of risk assessment procedures to be performed 
C) Identify and assess the risk of material misstatements occurring at the financial statement level and the account balance level 
D) Begin development of an audit strategy 
A) Determine who is most likely to commit fraud 
B) Determine the type and extent of risk assessment procedures to be performed 
C) Identify and assess the risk of material misstatements occurring at the financial statement level and the account balance level 
D) Begin development of an audit strategy

Question 11

What is audit risk?

Accepted Answer

A) The risk that an auditor expresses an inappropriate audit opinion when financial statements are materially misstated 
B) The risk that is explicit or implied and made by management regarding the recognition, measurement, presentation and disclosure of items included in the financial statements and notes 
C) The risk that a client's internal controls will not prevent or detect a material misstatement on a timely basis 
D) The assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration 
A) The risk that an auditor expresses an inappropriate audit opinion when financial statements are materially misstated 
B) The risk that is explicit or implied and made by management regarding the recognition, measurement, presentation and disclosure of items included in the financial statements and notes 
C) The risk that a client's internal controls will not prevent or detect a material misstatement on a timely basis 
D) The assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration

Question 12

Which of the following denotes information or misstatements that exceed the magnitude of an auditor's preliminary materiality assessment?

Accepted Answer

A) Quantitative materiality 
B) Qualitative materiality 
C) Professional materiality 
D) Professional judgement 
A) Quantitative materiality 
B) Qualitative materiality 
C) Professional materiality 
D) Professional judgement

Question 13

The PCAOB periodically issues Staff Audit Practice Alerts, and these _______.

Accepted Answer

A) are meant to provide guidance in the application of the standards 
B) have the full weight of any audit standard 
C) are FASB standards 
D) are IRS regulations 
A) are meant to provide guidance in the application of the standards 
B) have the full weight of any audit standard 
C) are FASB standards 
D) are IRS regulations

Question 14

AU-C 300 Planning an Audit and AS 2101 Audit Planning primarily requires auditors to _______.

Accepted Answer

A) plan the audit by assessing risk to reduce audit risk to an acceptably low level 
B) perform tests of the system of internal control, or tests of account balances, transactions, or disclosures 
C) make decisions about the extent and timing of detailed testing of account balances and transactions 
D) rely on the client's system of internal controls 
A) plan the audit by assessing risk to reduce audit risk to an acceptably low level 
B) perform tests of the system of internal control, or tests of account balances, transactions, or disclosures 
C) make decisions about the extent and timing of detailed testing of account balances and transactions 
D) rely on the client's system of internal controls

Question 15

Detection of fraud refers to _______.

Accepted Answer

A) the use of controls and procedures aimed at uncovering a fraud should one occur 
B) the use of controls and procedures aimed at avoiding a fraud 
C) auditors who assess fraud risk factors 
D) incentives to commit fraud 
A) the use of controls and procedures aimed at uncovering a fraud should one occur 
B) the use of controls and procedures aimed at avoiding a fraud 
C) auditors who assess fraud risk factors 
D) incentives to commit fraud

Question 16

As per the appendix to AU-C 210, Terms of Engagement, a typical engagement letter for a private company client begins with a paragraph on the ________.

Accepted Answer

A) objective and scope of the audit 
B) responsibilities of the auditor 
C) responsibilities of management 
D) fee arrangements and billings 
A) objective and scope of the audit 
B) responsibilities of the auditor 
C) responsibilities of management 
D) fee arrangements and billings

Question 17

An engagement letter is like a(an) _______.

Accepted Answer

A) contract 
B) audit report 
C) job application 
D) note payable 
A) contract 
B) audit report 
C) job application 
D) note payable

Question 18

Total equity may be more reliable of a benchmark for determining planning materiality when a company is experiencing a _______.

Accepted Answer

A) loss or very poor operating results 
B) high number of operating lease contracts 
C) large amount of property, plant, and equipment purchases 
D) significant volume of sales. 
A) loss or very poor operating results 
B) high number of operating lease contracts 
C) large amount of property, plant, and equipment purchases 
D) significant volume of sales.

Question 19

At the assertion level, the risk of material misstatement refers to risks that affect classes of ________.

Accepted Answer

A) account balances, only 
B) transactions and disclosures, only 
C) disclosures, only 
D) transactions, account balances, and disclosures 
A) account balances, only 
B) transactions and disclosures, only 
C) disclosures, only 
D) transactions, account balances, and disclosures

Question 20

If RMM is low, auditors are much more likely to perform substantive procedures for balance sheet accounts ______.

Accepted Answer

A) one or two months prior to year-end 
B) one or two months after year-end 
C) at year-end 
D) None of these answer choices are correct. 
A) one or two months prior to year-end 
B) one or two months after year-end 
C) at year-end 
D) None of these answer choices are correct.

Which of the following is an impediment to the application of professional skepticism?

The process used when developing an audit strategy at the account or assertion level begins with identifying inherent risks at the account or assertion level.The second step is to _______.

Identification of risk factors is typically associated with what phase of the audit?

An example of misappropriation of assets is _______.

Which of the following statements are true?

What is control risk?

An evaluation of the results of the detailed testing in light of the auditor's understanding of the client and forming an opinion on the fair presentation of the client's financial statements is associated with what phase of the audit?

Which of the following is an example of an incentive or pressure that increases the risk of fraud?

What are the benefits of considering management assertions in the audit process?

After determining materiality, which of the following is NOT a step for the auditor to follow?

What is audit risk?

Which of the following denotes information or misstatements that exceed the magnitude of an auditor's preliminary materiality assessment?

The PCAOB periodically issues Staff Audit Practice Alerts, and these _______.

AU-C 300 Planning an Audit and AS 2101 Audit Planning primarily requires auditors to _______.

Detection of fraud refers to _______.

As per the appendix to AU-C 210, Terms of Engagement, a typical engagement letter for a private company client begins with a paragraph on the ________.

An engagement letter is like a(an) _______.

Total equity may be more reliable of a benchmark for determining planning materiality when a company is experiencing a _______.

At the assertion level, the risk of material misstatement refers to risks that affect classes of ________.

If RMM is low, auditors are much more likely to perform substantive procedures for balance sheet accounts ______.

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 is an impediment to the application of professional skepticism?

The process used when developing an audit strategy at the account or assertion level begins with identifying inherent risks at the account or assertion level.The second step is to _______.

Identification of risk factors is typically associated with what phase of the audit?

An example of misappropriation of assets is _______.

Which of the following statements are true?

What is control risk?

An evaluation of the results of the detailed testing in light of the auditor's understanding of the client and forming an opinion on the fair presentation of the client's financial statements is associated with what phase of the audit?

Which of the following is an example of an incentive or pressure that increases the risk of fraud?

What are the benefits of considering management assertions in the audit process?

After determining materiality, which of the following is NOT a step for the auditor to follow?

What is audit risk?

Which of the following denotes information or misstatements that exceed the magnitude of an auditor's preliminary materiality assessment?

The PCAOB periodically issues Staff Audit Practice Alerts, and these _______.

AU-C 300 Planning an Audit and AS 2101 Audit Planning primarily requires auditors to _______.

Detection of fraud refers to _______.

As per the appendix to AU-C 210, Terms of Engagement, a typical engagement letter for a private company client begins with a paragraph on the ________.

An engagement letter is like a(an) _______.

Total equity may be more reliable of a benchmark for determining planning materiality when a company is experiencing a _______.

At the assertion level, the risk of material misstatement refers to risks that affect classes of ________.

If RMM is low, auditors are much more likely to perform substantive procedures for balance sheet accounts ______.

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