Exam 4: Management Fraud and Audit Risk

If tests of controls induce the auditor to change the assessed level of control risk for Property Plant & Equipment from 50% to 100%, and audit risk (6%) and inherent risk remain constant, the acceptable level of detection risk:

Based on audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would:

The purpose of an audit strategy is:

Experience has shown that the many large fraudulent transactions can be found in:

Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. They range from simple comparisons to the use of complex models involving many relationships and elements of data. They involve comparisons of recorded amounts, or ratios developed from recorded amounts, to expectations developed by auditors.Required:Describe the broad purposes of analytical procedures.Identify the sources of information from which an auditor develops expectations.

When fraud risk is significant, and management cooperation is unsatisfactory, the auditors will most likely:

Which of the following would not be considered an analytical procedure?

Which of the following statements best describes auditors' responsibility to detect errors and frauds?

Sources of financial and nonfinancial data do not include:

When an auditor increases the planned assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most likely increase the:

If control risk increases, and all other risks in the audit risk model stay constant except the one referred to below, which of the following statements is correct?

The risk of material misstatement differs from detection risk in that it:

Inherent risk and control risk differ from detection risk in that inherent risk and control risk are:

Which of the following is not required by AU-C 240, "Consideration of Fraud in a Financial Statement Audit"?

If fictitious credit sales were recorded, and the fictitious accounts receivable were later directly written off as bad debt expense,

Managing business risk is the responsibility of:

An auditor's analytical procedures indicate a lower than expected return on an equity method investment. This situation most likely could have been caused by:

While performing an audit of the financial statements of a company for the year ended December 31, year 1, the auditor notes that the company's sales increased substantially in December, year 1, with a corresponding decrease in January, year 2. In assessing the risk of fraudulent financial reporting or misappropriation of assets, what should be the auditor's initial indication about the potential for fraud in sales revenue?

Analytical procedures are most appropriate when testing which of the following types of transactions?

Independent auditors who consider fraud in the course of financial statement audits are well-advised to quantify "materiality" in terms of: