Question 1

When management has an adequate level of integrity for the auditor to accept the engagement but cannot be regarded as completely honest in all dealings, auditors normally:

Accepted Answer

A)  increase inherent risk and control risk. 
B)  reduce inherent risk and control risk. 
C)  reduce acceptable audit risk and increase inherent risk. 
D)  increase acceptable audit risk and reduce inherent risk. 
A)  increase inherent risk and control risk. 
B)  reduce inherent risk and control risk. 
C)  reduce acceptable audit risk and increase inherent risk. 
D)  increase acceptable audit risk and reduce inherent risk.

Question 2

In practice, auditors rarely assign numerical probabilities to inherent risk, control risk, or acceptable audit risk.It is more common to assess these risks as high, medium or low.For each of the four situations below, fill in the blanks for planned detection risk and the amount of evidence you would plan to gather ('planned evidence')using the terms high, medium or low.

Accepted Answer

1.low, hig

Question 3

When allocating materiality, most practitioners choose to allocate to:

Accepted Answer

A)  the income statement accounts because they are more important. 
B)  both balance sheet and income statement accounts because there could be errors on either one. 
C)  all of the financial statements because there could be errors on other statements besides the income statement and balance sheet. 
D)  the balance sheet accounts because there are fewer of them. 
A)  the income statement accounts because they are more important. 
B)  both balance sheet and income statement accounts because there could be errors on either one. 
C)  all of the financial statements because there could be errors on other statements besides the income statement and balance sheet. 
D)  the balance sheet accounts because there are fewer of them.

Question 4

If acceptable audit risk is low and inherent and control risks are high, the amount of evidence required is:

Accepted Answer

A)  low. 
B)  indeterminate. 
C)  medium. 
D)  high. 
A)  low. 
B)  indeterminate. 
C)  medium. 
D)  high.

Question 5

The primary purpose of the audit risk model is to aid auditors in planning the extent of tests of controls and determining which particular controls should be tested.

Accepted Answer

A) True 
 B)False

When management has an adequate level of integrity for the auditor to accept the engagement but cannot be regarded as completely honest in all dealings, auditors normally:

When allocating materiality, most practitioners choose to allocate to:

If acceptable audit risk is low and inherent and control risks are high, the amount of evidence required is:

The primary purpose of the audit risk model is to aid auditors in planning the extent of tests of controls and determining which particular controls should be tested.

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

Filters

Exam7: Materiality and risk

When management has an adequate level of integrity for the auditor to accept the engagement but cannot be regarded as completely honest in all dealings, auditors normally:

When allocating materiality, most practitioners choose to allocate to:

If acceptable audit risk is low and inherent and control risks are high, the amount of evidence required is:

The primary purpose of the audit risk model is to aid auditors in planning the extent of tests of controls and determining which particular controls should be tested.

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

Filters