Question 1

Which of the following heavily influences the process of determining an audit strategy for an account or assertion?

Accepted Answer

A) The risk of material misstatement 
B) Materiality 
C) Professional skepticism 
D) All of these options are correct. 
A) The risk of material misstatement 
B) Materiality 
C) Professional skepticism 
D) All of these options are correct.

Question 2

Auditors can control detection risk by _______.

Accepted Answer

A) planning to perform more or less detailed audit procedures 
B) planning to perform more or less audit procedures on controls 
C) designing internal controls for the client 
D) designing the software processes that the client uses to process accounting information 
A) planning to perform more or less detailed audit procedures 
B) planning to perform more or less audit procedures on controls 
C) designing internal controls for the client 
D) designing the software processes that the client uses to process accounting information

Question 3

The requirement that the auditor have access to all information needed to perform the audit is stated in ________.

Accepted Answer

A) the engagement letter 
B) substantive procedures 
C) an audit strategy 
D) AU-C 300 Planning an Audit 
A) the engagement letter 
B) substantive procedures 
C) an audit strategy 
D) AU-C 300 Planning an Audit

Question 4

What are tests of controls?

Accepted Answer

A) Audit procedures designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level. 
B) Audit procedures designed for the determining the amount of time spent testing the client's internal controls and conducting detailed testing of transactions and account balances. 
C) Audit controls for developing an audit plan that details the nature, extent, and timing of audit procedures to be performed. 
D) Audit timelines of when audit activities occur for the audit of a client that uses a calendar year-end. 
A) Audit procedures designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level. 
B) Audit procedures designed for the determining the amount of time spent testing the client's internal controls and conducting detailed testing of transactions and account balances. 
C) Audit controls for developing an audit plan that details the nature, extent, and timing of audit procedures to be performed. 
D) Audit timelines of when audit activities occur for the audit of a client that uses a calendar year-end.

Question 5

An audit plan details the nature, extent, and timing of audit procedures to be performed.The "timing" of audit procedures is best defined as _______.

Accepted Answer

A) when the procedure will be performed 
B) how much testing will be done 
C) what type of procedure will be used 
D) the reliability and relevance of evidence obtained in the audit 
A) when the procedure will be performed 
B) how much testing will be done 
C) what type of procedure will be used 
D) the reliability and relevance of evidence obtained in the audit

Question 6

Holding everything else constant, as the auditor's evaluation of materiality_______, the auditor is looking to obtain a more precise conclusion about the financial statements.The _______precision of the audit will cause the auditor to perform more extensive audit procedures.

Accepted Answer

A) decreases, increased 
B) increases, decreased 
C) increases, increased 
D) decreases, decreased 
A) decreases, increased 
B) increases, decreased 
C) increases, increased 
D) decreases, decreased

Question 7

What two factors lead to the development of an overall strategy?

Accepted Answer

A) The auditor's determination of materiality and audit risk 
B) The auditor's determination of inherent risk and control risk 
C) The auditor's determination of the risk of material misstatement and professional skepticism 
D) The auditor's determination of performance materiality and fraud risk 
A) The auditor's determination of materiality and audit risk 
B) The auditor's determination of inherent risk and control risk 
C) The auditor's determination of the risk of material misstatement and professional skepticism 
D) The auditor's determination of performance materiality and fraud risk

Question 8

Which of the following is performed during the risk assessment phase?

Accepted Answer

A) Risk and materiality assessment 
B) Detailed tests of controls 
C) Substantive testing of transactions and accounts 
D) Drawing conclusions based upon the evidence gathered 
A) Risk and materiality assessment 
B) Detailed tests of controls 
C) Substantive testing of transactions and accounts 
D) Drawing conclusions based upon the evidence gathered

Question 9

The general type of fraud that involves intentionally misstating items or omitting important facts from the financial statements is typically known as _______.

Accepted Answer

A) fraudulent financial reporting 
B) writing checks to fictitious vendors 
C) using company cars for personal use 
D) theft of inventory by employees 
A) fraudulent financial reporting 
B) writing checks to fictitious vendors 
C) using company cars for personal use 
D) theft of inventory by employees

Question 10

Which of the following are covered during the risk response phase of an audit?

Accepted Answer

A) The performance of detailed tests of controls 
B) Substantive or detailed testing of transactions and accounts 
C) Forming an opinion on the fair presentation of the client's financial statements 
D) Identifying factors that may impact the risk of a material misstatement occurring 
A) The performance of detailed tests of controls 
B) Substantive or detailed testing of transactions and accounts 
C) Forming an opinion on the fair presentation of the client's financial statements 
D) Identifying factors that may impact the risk of a material misstatement occurring

Question 11

If new information comes to light that would cause the auditor to establish a different level of planning materiality, then the auditor _______.

Accepted Answer

A) should examine the information and make adjustments to materiality as needed 
B) issue a qualified opinion as part of the audit report 
C) follow the auditing standards that recommend an appropriate percentage of total assets as a benchmark for planning materiality for all companies 
D) have management of the company select the appropriate benchmark for planning materiality 
A) should examine the information and make adjustments to materiality as needed 
B) issue a qualified opinion as part of the audit report 
C) follow the auditing standards that recommend an appropriate percentage of total assets as a benchmark for planning materiality for all companies 
D) have management of the company select the appropriate benchmark for planning materiality

Question 12

Tests of controls are also known as _______.

Accepted Answer

A) internal controls testing 
B) substantive control testing 
C) tests of details 
D) material misstatement testing 
A) internal controls testing 
B) substantive control testing 
C) tests of details 
D) material misstatement testing

Question 13

What happens if an independence threat appears to be insurmountable?

Accepted Answer

A) An audit firm should decline the offer to be the auditor of a prospective client or resign from the audit of an existing client. 
B) The audit firm should contact the State Board of Accountancy so they can make a press release to discourage other accountants from taking the engagement. 
C) The audit firm should make certain that safeguards are put in place to limit or remove those threats. 
D) The audit firm should take the engagement and continue to make certain that safeguards are put in place to limit or remove those threats. 
A) An audit firm should decline the offer to be the auditor of a prospective client or resign from the audit of an existing client. 
B) The audit firm should contact the State Board of Accountancy so they can make a press release to discourage other accountants from taking the engagement. 
C) The audit firm should make certain that safeguards are put in place to limit or remove those threats. 
D) The audit firm should take the engagement and continue to make certain that safeguards are put in place to limit or remove those threats.

Question 14

An audit plan details the nature, extent, and timing of audit procedures to be performed.The "extent" of audit procedures is best defined as _______.

Accepted Answer

A) how much testing will be done 
B) what type of procedure will be used 
C) the reliability and relevance of evidence obtained in the audit 
D) when the procedure will be performed 
A) how much testing will be done 
B) what type of procedure will be used 
C) the reliability and relevance of evidence obtained in the audit 
D) when the procedure will be performed

Question 15

Which of the following is true in the case of an auditor communicating with a continuing client in the beginning of a contract?

Accepted Answer

A) A new engagement letter is not needed if the terms of engagement remain unchanged 
B) No reminder of the engagement terms is needed if no revisions are made to the engagement letter 
C) No reminder of the engagement terms is needed if a continuance decision is made. 
D) No engagement letter is needed in all cases of continuance decision. 
A) A new engagement letter is not needed if the terms of engagement remain unchanged 
B) No reminder of the engagement terms is needed if no revisions are made to the engagement letter 
C) No reminder of the engagement terms is needed if a continuance decision is made. 
D) No engagement letter is needed in all cases of continuance decision.

Question 16

Which term means that (or is defined as): auditors should maintain a questioning mind and thoroughly investigate all evidence presented by the client?

Accepted Answer

A) Professional skepticism 
B) Audit risk 
C) Audit responsibility 
D) Audit Assertion 
A) Professional skepticism 
B) Audit risk 
C) Audit responsibility 
D) Audit Assertion

Question 17

Information is considered quantitatively material if it _______.

Accepted Answer

A) exceeds the dollar magnitude of an auditor's planning materiality assessment 
B) affects a user's decision-making process for a reason other than its dollar magnitude 
C) indicates the audit client is in danger of breaching a debt covenant 
D) indicates there is a change in client operations that affects the level of risk faced by the client 
A) exceeds the dollar magnitude of an auditor's planning materiality assessment 
B) affects a user's decision-making process for a reason other than its dollar magnitude 
C) indicates the audit client is in danger of breaching a debt covenant 
D) indicates there is a change in client operations that affects the level of risk faced by the client

Question 18

The risk assessment process is a(an) _______.

Accepted Answer

A) iterative process 
B) one-time process 
C) concluding process 
D) infrequent process 
A) iterative process 
B) one-time process 
C) concluding process 
D) infrequent process

Question 19

What is the last phase of the audit?

Accepted Answer

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

Question 20

If results from the tests of controls show the internal control is effective at preventing and/or detecting material misstatements, auditors will conclude that control risk is ______ and overall risk of material misstatement (RMM) is ______.

Accepted Answer

A) low; low 
B) high; high 
C) high; low 
D) low; high 
A) low; low 
B) high; high 
C) high; low 
D) low; high

Which of the following heavily influences the process of determining an audit strategy for an account or assertion?

Auditors can control detection risk by _______.

The requirement that the auditor have access to all information needed to perform the audit is stated in ________.

What are tests of controls?

An audit plan details the nature, extent, and timing of audit procedures to be performed.The "timing" of audit procedures is best defined as _______.

Holding everything else constant, as the auditor's evaluation of materiality_, the auditor is looking to obtain a more precise conclusion about the financial statements.The _precision of the audit will cause the auditor to perform more extensive audit procedures.

What two factors lead to the development of an overall strategy?

Which of the following is performed during the risk assessment phase?

The general type of fraud that involves intentionally misstating items or omitting important facts from the financial statements is typically known as _______.

Which of the following are covered during the risk response phase of an audit?

If new information comes to light that would cause the auditor to establish a different level of planning materiality, then the auditor _______.

Tests of controls are also known as _______.

What happens if an independence threat appears to be insurmountable?

An audit plan details the nature, extent, and timing of audit procedures to be performed.The "extent" of audit procedures is best defined as _______.

Which of the following is true in the case of an auditor communicating with a continuing client in the beginning of a contract?

Which term means that (or is defined as): auditors should maintain a questioning mind and thoroughly investigate all evidence presented by the client?

Information is considered quantitatively material if it _______.

The risk assessment process is a(an) _______.

What is the last phase of the audit?

If results from the tests of controls show the internal control is effective at preventing and/or detecting material misstatements, auditors will conclude that control risk is and overall risk of material misstatement (RMM) is .

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 heavily influences the process of determining an audit strategy for an account or assertion?

Auditors can control detection risk by _______.

The requirement that the auditor have access to all information needed to perform the audit is stated in ________.

What are tests of controls?

An audit plan details the nature, extent, and timing of audit procedures to be performed.The "timing" of audit procedures is best defined as _______.

Holding everything else constant, as the auditor's evaluation of materiality_______, the auditor is looking to obtain a more precise conclusion about the financial statements.The _______precision of the audit will cause the auditor to perform more extensive audit procedures.

What two factors lead to the development of an overall strategy?

Which of the following is performed during the risk assessment phase?

The general type of fraud that involves intentionally misstating items or omitting important facts from the financial statements is typically known as _______.

Which of the following are covered during the risk response phase of an audit?

If new information comes to light that would cause the auditor to establish a different level of planning materiality, then the auditor _______.

Tests of controls are also known as _______.

What happens if an independence threat appears to be insurmountable?

An audit plan details the nature, extent, and timing of audit procedures to be performed.The "extent" of audit procedures is best defined as _______.

Which of the following is true in the case of an auditor communicating with a continuing client in the beginning of a contract?

Which term means that (or is defined as): auditors should maintain a questioning mind and thoroughly investigate all evidence presented by the client?

Information is considered quantitatively material if it _______.

The risk assessment process is a(an) _______.

What is the last phase of the audit?

If results from the tests of controls show the internal control is effective at preventing and/or detecting material misstatements, auditors will conclude that control risk is ______ and overall risk of material misstatement (RMM) is ______.

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

Holding everything else constant, as the auditor's evaluation of materiality_, the auditor is looking to obtain a more precise conclusion about the financial statements.The _precision of the audit will cause the auditor to perform more extensive audit procedures.

If results from the tests of controls show the internal control is effective at preventing and/or detecting material misstatements, auditors will conclude that control risk is and overall risk of material misstatement (RMM) is .