Question 1

For a private company client,auditors are required to test any internal controls they believe have not been operating effectively during the period under audit.

Accepted Answer

A) True 
 B)False  False

Question 2

Audit assurance is the complement of planned detection risk,that is,one minus planned detection risk.

Accepted Answer

A) True 
 B)False  False

Question 3

Why do auditors use the audit risk model when planning an audit?

Accepted Answer

The audit risk model is used primarily for planning purposes in deciding how much evidence to accumulate in each cycle.The auditor sets an acceptable level of audit risk,(AAR)assesses inherent risk (IR)and control risk (CR),and then uses the following audit risk model to determine an appropriate level of planned detection risk (PDR):
PDR =

Question 4

The risk of material misstatement is a combination of two client controlled factors: inherent risk and control risk.What is inherent risk,why is it important and give examples of inherent risk factors.

Accepted Answer

Inherent risk is the auditor's assessmen

Question 5

Inherent risk and control risk exist independent of the audit of the financial statements.

Accepted Answer

A) True 
 B)False

Question 6

Acceptable audit risk and the amount of substantive evidence required are inversely related.

Accepted Answer

A) True 
 B)False

Question 7

Which is a True statement about audit risk?

Accepted Answer

A) Audit risk measures the risk that a material misstatement could occur and not be detected by internal control. 
B) When auditors decide on a higher acceptable audit risk,they want to be more certain that the financial statements are not materially misstated. 
C) Audit assurance is the complement of acceptable audit risk. 
D) There is an inverse relationship between acceptable audit risk and planned detection risk. 
A) Audit risk measures the risk that a material misstatement could occur and not be detected by internal control. 
B) When auditors decide on a higher acceptable audit risk,they want to be more certain that the financial statements are not materially misstated. 
C) Audit assurance is the complement of acceptable audit risk. 
D) There is an inverse relationship between acceptable audit risk and planned detection risk.

Question 8

Auditing standards require the engagement partner to be included in discussions about the susceptibility of the client's financial statements to material misstatements.

Accepted Answer

A) True 
 B)False

Question 9

If the auditor decides to reduce acceptable audit risk,planned detection risk

Accepted Answer

A) increases. 
B) decreases. 
C) stay the same. 
D) cannot be determined. 
A) increases. 
B) decreases. 
C) stay the same. 
D) cannot be determined.

Question 10

An auditor who audits a business cycle that has low inherent risk should

Accepted Answer

A) increase the amount of audit evidence gathered. 
B) assign more experienced staff to that area. 
C) expand planning procedures. 
D) do none of the above. 
A) increase the amount of audit evidence gathered. 
B) assign more experienced staff to that area. 
C) expand planning procedures. 
D) do none of the above.

Question 11

When taken together,the concepts of risk and materiality in auditing

Accepted Answer

A) measure the uncertainty of amounts of a given magnitude. 
B) measure uncertainty only. 
C) measure magnitude only. 
D) measure inherent risk. 
A) measure the uncertainty of amounts of a given magnitude. 
B) measure uncertainty only. 
C) measure magnitude only. 
D) measure inherent risk.

Question 12

Auditors are not allowed to make inquires of employees who are not considered management,such as marketing or sales personnel.

Accepted Answer

A) True 
 B)False

Question 13

Risk assessment procedures include inquiries of management and others by the auditor.As part of these procedures,the auditor should talk to

Accepted Answer

A) internal auditors. 
B) board of directors. 
C) individuals involved with regulatory compliance. 
D) all of the above. 
A) internal auditors. 
B) board of directors. 
C) individuals involved with regulatory compliance. 
D) all of the above.

Question 14

Risk assessment procedures include

Accepted Answer

A) a required discussion among the staff members of the audit and the client regarding material misstatements in the financial statement. 
B) determination of the type of audit opinion to issue. 
C) observation of the entity's operations. 
D) assessing acceptable audit risk. 
A) a required discussion among the staff members of the audit and the client regarding material misstatements in the financial statement. 
B) determination of the type of audit opinion to issue. 
C) observation of the entity's operations. 
D) assessing acceptable audit risk.

Question 15

When assessing risk,it is important to remember that

Accepted Answer

A) for acceptable audit risk,the SEC decides the risk the CPA firm should take for public clients. 
B) inherent risk can be changed by the auditor. 
C) detection risk can only be determined after audit risk,inherent risk,and control risk are determined. 
D) control risk is determined by company management since they are responsible for internal control. 
A) for acceptable audit risk,the SEC decides the risk the CPA firm should take for public clients. 
B) inherent risk can be changed by the auditor. 
C) detection risk can only be determined after audit risk,inherent risk,and control risk are determined. 
D) control risk is determined by company management since they are responsible for internal control.

Question 16

An acceptable audit risk assessment of low indicates a risky client requiring more extensive evidence,assignment of more experienced personnel,and/or a more extensive review of audit files.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is True regarding audit risk for segments?

Accepted Answer

A) Control risk must be assessed at the same level for all accounts. 
B) Factors affecting inherent risk do not differ from account to account. 
C) Acceptable audit risk is ordinarily assessed by the auditor during the substantive test of balances phase and is held constant for each major cycle and account. 
D) In some cases,a lower acceptable audit risk may be more appropriate for one account than for others. 
A) Control risk must be assessed at the same level for all accounts. 
B) Factors affecting inherent risk do not differ from account to account. 
C) Acceptable audit risk is ordinarily assessed by the auditor during the substantive test of balances phase and is held constant for each major cycle and account. 
D) In some cases,a lower acceptable audit risk may be more appropriate for one account than for others.

Question 18

Describe the audit risk model and each of its components.

Accepted Answer

The planning form of the audit risk mode

Question 19

Risk assessment procedures are performed to identify and assess the risk of material misstatement.List three risk assessment procedures.

Accepted Answer

•Inquiries of management and others with

Question 20

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

Exam 9: Materiality and Risk

For a private company client,auditors are required to test any internal controls they believe have not been operating effectively during the period under audit.

Audit assurance is the complement of planned detection risk,that is,one minus planned detection risk.

Why do auditors use the audit risk model when planning an audit?

The risk of material misstatement is a combination of two client controlled factors: inherent risk and control risk.What is inherent risk,why is it important and give examples of inherent risk factors.

Inherent risk and control risk exist independent of the audit of the financial statements.

Acceptable audit risk and the amount of substantive evidence required are inversely related.

Which is a True statement about audit risk?

Auditing standards require the engagement partner to be included in discussions about the susceptibility of the client's financial statements to material misstatements.

If the auditor decides to reduce acceptable audit risk,planned detection risk

An auditor who audits a business cycle that has low inherent risk should

When taken together,the concepts of risk and materiality in auditing

Auditors are not allowed to make inquires of employees who are not considered management,such as marketing or sales personnel.

Risk assessment procedures include inquiries of management and others by the auditor.As part of these procedures,the auditor should talk to

Risk assessment procedures include

When assessing risk,it is important to remember that

An acceptable audit risk assessment of low indicates a risky client requiring more extensive evidence,assignment of more experienced personnel,and/or a more extensive review of audit files.

Which of the following is True regarding audit risk for segments?

Describe the audit risk model and each of its components.

Risk assessment procedures are performed to identify and assess the risk of material misstatement.List three risk assessment procedures.

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

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters