Exam7: Materiality and risk

The Auditor's Responsibility paragraph in the auditor's report includes two important phrases that are directly related to materiality and risk.What are these two phrases? 1)'relevant ethical requirements relating to audit engagements' 2)'plan and perform the audit' 3)'free from material misstatement' 4)'reasonable assurance'

(Multiple Choice)

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Question 41

Which one of the following might NOT signal a lack of integrity in management?

(Multiple Choice)

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Question 42

When discussing control risk (CR)and the audit risk model, which one of the following statements is NOT true?

(Multiple Choice)

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Question 43

Which one of the following statements is NOT correct?

(Multiple Choice)

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Question 44

Discuss how auditors use the audit risk model when planning an audit.

(Essay)

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Question 45

Inherent risk and planned detection risk are inversely related; i.e., as inherent risk increases, planned detection risk should decrease, ceteris paribus.

(True/False)

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Question 46

Unlike control risk and inherent risk, planned detection risk and required audit evidence will vary from cycle to cycle.

(True/False)

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Question 47

When planned detection risk is high, inherent risk and control risk will also be high.

(True/False)

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Question 48

Where auditors have knowledge of specific intended users and uses, their judgement of what they consider material:

(Multiple Choice)

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Question 49

If an auditor believes the client will have financial difficulties after the audit report is issued, and external users will be relying heavily on the financial statements, the auditor will probably set acceptable audit risk as high.

(True/False)

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Question 50

Suppose an auditor calculates an estimate of the errors by direct projection from the sample to the population.If the auditor finds $15 000 of net overstatement errors in a sample of $100 000 out of a total population of $500 000, the estimate of errors in the population will be:

(Multiple Choice)

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Question 51

Describe the audit risk model and each of its components.

(Essay)

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Question 52

Discuss the three main factors that affect an auditor's preliminary judgement about materiality.

(Essay)

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Question 53

To maximise audit efficiency, the auditor should allocate less tolerable error to accounts that can be verified by using low-cost audit procedures, such as analytical procedures, than to accounts that are more costly to audit.

(True/False)

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Question 54

Identify the three strategies that auditors can use during the audit to respond to risk.

(Essay)

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Question 55

An aim of allocating a preliminary judgement about materiality to balance sheet accounts is to:

(Multiple Choice)

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Question 56

In situations in which the auditor believes the chance of financial failure or loss is high, and there is a corresponding increase in engagement risk for the auditor, acceptable audit risk should:

(Multiple Choice)

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Question 57

What is an appropriate strategy when an audit area has a low acceptable risk?

(Multiple Choice)

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Question 58

Most auditors would use a higher inherent risk for inventory when:

(Multiple Choice)

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Question 59

Allocating the preliminary judgement about materiality to segments of the financial statements is necessary because:

(Multiple Choice)

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Question 60

Showing 41 - 60 of 105

Which one of the following might NOT signal a lack of integrity in management?

When discussing control risk (CR)and the audit risk model, which one of the following statements is NOT true?

Which one of the following statements is NOT correct?

Discuss how auditors use the audit risk model when planning an audit.

Inherent risk and planned detection risk are inversely related; i.e., as inherent risk increases, planned detection risk should decrease, ceteris paribus.

Unlike control risk and inherent risk, planned detection risk and required audit evidence will vary from cycle to cycle.

When planned detection risk is high, inherent risk and control risk will also be high.

Where auditors have knowledge of specific intended users and uses, their judgement of what they consider material:

If an auditor believes the client will have financial difficulties after the audit report is issued, and external users will be relying heavily on the financial statements, the auditor will probably set acceptable audit risk as high.

Suppose an auditor calculates an estimate of the errors by direct projection from the sample to the population.If the auditor finds $15 000 of net overstatement errors in a sample of $100 000 out of a total population of $500 000, the estimate of errors in the population will be:

Describe the audit risk model and each of its components.

Discuss the three main factors that affect an auditor's preliminary judgement about materiality.

To maximise audit efficiency, the auditor should allocate less tolerable error to accounts that can be verified by using low-cost audit procedures, such as analytical procedures, than to accounts that are more costly to audit.

Identify the three strategies that auditors can use during the audit to respond to risk.

An aim of allocating a preliminary judgement about materiality to balance sheet accounts is to:

In situations in which the auditor believes the chance of financial failure or loss is high, and there is a corresponding increase in engagement risk for the auditor, acceptable audit risk should:

What is an appropriate strategy when an audit area has a low acceptable risk?

Most auditors would use a higher inherent risk for inventory when:

Allocating the preliminary judgement about materiality to segments of the financial statements is necessary because:

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Completing the audit

Audit reporting

Other auditing and assurance engagements

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