Question 1

Auditors find it easier to audit related accounts instead of attacking each account on its own.

Accepted Answer

A) True 
 B)False  True

Question 2

An auditor might suspect that the auditee is in financial difficulty if:

Accepted Answer

A) The auditee offers more generous customer credit terms. 
B) The auditee takes a large bank loan at market rates. 
C) Sales increase and inventory increases. 
D) Purchases increase and payables increase. 
A) The auditee offers more generous customer credit terms. 
B) The auditee takes a large bank loan at market rates. 
C) Sales increase and inventory increases. 
D) Purchases increase and payables increase. A

Question 3

Inherent risk is the

Accepted Answer

A) Probability that some accounts are more susceptible to misstatement than others. 
B) Probability that the client's internal control policies and procedures will fail to detect material misstatements. 
C) Probability that material misstatements have occurred in transactions entering the accounting system used to develop financial statements. 
D) Probability that the auditor may not detect material misstatements in the financial statements. 
A) Probability that some accounts are more susceptible to misstatement than others. 
B) Probability that the client's internal control policies and procedures will fail to detect material misstatements. 
C) Probability that material misstatements have occurred in transactions entering the accounting system used to develop financial statements. 
D) Probability that the auditor may not detect material misstatements in the financial statements. C

Question 4

As control risk gets smaller, audit risk gets larger, assuming all other risks stay constant.

Accepted Answer

A) True 
 B)False

Question 5

What are four of the elements of the internal control environment?

Accepted Answer

The following are elements of the intern

Question 6

Define control risk.

Accepted Answer

Control risk is the risk that

Question 7

The risk that an auditor's procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement actually does exist is

Accepted Answer

A) Audit risk 
B) Inherent risk. 
C) Control risk. 
D) Detection risk. 
A) Audit risk 
B) Inherent risk. 
C) Control risk. 
D) Detection risk.

Question 8

After obtaining an understanding of the internal control system and assessing control risk, an auditor decided not to perform additional tests of controls.The auditor most likely concluded that the

Accepted Answer

A) Additional evidence to support a further reduction in control risk was not cost-beneficial. 
B) Assessed level of inherent risk exceeded the assessed level of control risk. 
C) Internal control system was properly designed and justifiably may be relied on. 
D) Evidence obtainable through tests of controls would not support an increased level of control risk. 
A) Additional evidence to support a further reduction in control risk was not cost-beneficial. 
B) Assessed level of inherent risk exceeded the assessed level of control risk. 
C) Internal control system was properly designed and justifiably may be relied on. 
D) Evidence obtainable through tests of controls would not support an increased level of control risk.

Question 9

Quality of earnings refers to:

Accepted Answer

A) The accuracy of the net income calculation. 
B) A company's ability to continue earning at its current level. 
C) How closely earnings per share agree to analyst predictions. 
D) The percentage of net income to total revenue. 
A) The accuracy of the net income calculation. 
B) A company's ability to continue earning at its current level. 
C) How closely earnings per share agree to analyst predictions. 
D) The percentage of net income to total revenue.

Question 10

To assess the risk of material misstatement at the financial statement level, the auditor needs a detailed knowledge of internal control components relevant to financial reporting.

Accepted Answer

A) True 
 B)False

Question 11

Business processes cross boundaries between functional areas of an organization.Business process management systems have been facilitated by:

Accepted Answer

A) Management information systems 
B) Enterprise resource planning systems 
C) Database management systems 
D) Web based application systems 
A) Management information systems 
B) Enterprise resource planning systems 
C) Database management systems 
D) Web based application systems

Question 12

The probability that an auditor will give an inappropriate opinion on the financial statements best describes

Accepted Answer

A) Audit risk. 
B) Inherent risk. 
C) Control risk. 
D) Detection risk. 
A) Audit risk. 
B) Inherent risk. 
C) Control risk. 
D) Detection risk.

Question 13

One way to think of an accounting process is as a cycle.The idea of a cycle reflects:

Accepted Answer

A) That transactions have to undergo a series of procedures before being recorded in the accounts. 
B) That transactions are not complete until they are recorded. 
C) That there is a set of accounts that record transaction information from the same business process. 
D) That every business process results in the start of another process. 
A) That transactions have to undergo a series of procedures before being recorded in the accounts. 
B) That transactions are not complete until they are recorded. 
C) That there is a set of accounts that record transaction information from the same business process. 
D) That every business process results in the start of another process.

Question 14

Two broad groupings of controls are:

Accepted Answer

A) Internal controls and segregation of duties. 
B) Physical access controls and password controls. 
C) Validity checks and completeness checks. 
D) General controls and application controls 
A) Internal controls and segregation of duties. 
B) Physical access controls and password controls. 
C) Validity checks and completeness checks. 
D) General controls and application controls

Question 15

Can an auditor place complete reliance on internal control to the exclusion of other audit procedures? Explain your answer using the audit risk model.

Accepted Answer

An auditor cannot place complete relianc

Question 16

Auditors do not create or control inherent risk; they can only try to assess its magnitude.

Accepted Answer

A) True 
 B)False

Question 17

Inherent risk and control risk differ from detection risk in that they

Accepted Answer

A) Arise from the misapplication of auditing procedures. 
B) May be assessed in either quantitative or non-quantitative terms. 
C) Exist independently of the financial statement audit. 
D) Can be changed at the auditor's discretion. 
A) Arise from the misapplication of auditing procedures. 
B) May be assessed in either quantitative or non-quantitative terms. 
C) Exist independently of the financial statement audit. 
D) Can be changed at the auditor's discretion.

Question 18

According to the Criteria of Control Guidance on Control, identify four values and preferences of senior management which can greatly influence an organization.

Accepted Answer

Values and preferences of senior managem

Question 19

Theoretically, when assessing the inherent risk related to an account balance, an auditor does not explicitly consider the

Accepted Answer

A) Liquidity of the account. 
B) Management estimates involved in determining the account balance. 
C) Internal control policies and procedures. 
D) Complexity of calculations involved. 
A) Liquidity of the account. 
B) Management estimates involved in determining the account balance. 
C) Internal control policies and procedures. 
D) Complexity of calculations involved.

Question 20

Business processes can be thought of as a structured set of activities within an entity.

Accepted Answer

A) True 
 B)False

Auditors find it easier to audit related accounts instead of attacking each account on its own.

An auditor might suspect that the auditee is in financial difficulty if:

Inherent risk is the

As control risk gets smaller, audit risk gets larger, assuming all other risks stay constant.

What are four of the elements of the internal control environment?

Define control risk.

The risk that an auditor's procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement actually does exist is

After obtaining an understanding of the internal control system and assessing control risk, an auditor decided not to perform additional tests of controls.The auditor most likely concluded that the

Quality of earnings refers to:

To assess the risk of material misstatement at the financial statement level, the auditor needs a detailed knowledge of internal control components relevant to financial reporting.

Business processes cross boundaries between functional areas of an organization.Business process management systems have been facilitated by:

The probability that an auditor will give an inappropriate opinion on the financial statements best describes

One way to think of an accounting process is as a cycle.The idea of a cycle reflects:

Two broad groupings of controls are:

Can an auditor place complete reliance on internal control to the exclusion of other audit procedures? Explain your answer using the audit risk model.

Auditors do not create or control inherent risk; they can only try to assess its magnitude.

Inherent risk and control risk differ from detection risk in that they

According to the Criteria of Control Guidance on Control, identify four values and preferences of senior management which can greatly influence an organization.

Theoretically, when assessing the inherent risk related to an account balance, an auditor does not explicitly consider the

Business processes can be thought of as a structured set of activities within an entity.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters

Exam 7: Assessing Risks and Internal Control

Auditors find it easier to audit related accounts instead of attacking each account on its own.

An auditor might suspect that the auditee is in financial difficulty if:

Inherent risk is the

As control risk gets smaller, audit risk gets larger, assuming all other risks stay constant.

What are four of the elements of the internal control environment?

Define control risk.

The risk that an auditor's procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement actually does exist is

After obtaining an understanding of the internal control system and assessing control risk, an auditor decided not to perform additional tests of controls.The auditor most likely concluded that the

Quality of earnings refers to:

To assess the risk of material misstatement at the financial statement level, the auditor needs a detailed knowledge of internal control components relevant to financial reporting.

Business processes cross boundaries between functional areas of an organization.Business process management systems have been facilitated by:

The probability that an auditor will give an inappropriate opinion on the financial statements best describes

One way to think of an accounting process is as a cycle.The idea of a cycle reflects:

Two broad groupings of controls are:

Can an auditor place complete reliance on internal control to the exclusion of other audit procedures? Explain your answer using the audit risk model.

Auditors do not create or control inherent risk; they can only try to assess its magnitude.

Inherent risk and control risk differ from detection risk in that they

According to the Criteria of Control Guidance on Control, identify four values and preferences of senior management which can greatly influence an organization.

Theoretically, when assessing the inherent risk related to an account balance, an auditor does not explicitly consider the

Business processes can be thought of as a structured set of activities within an entity.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters