Exam 9: Assessing the Risk of Material Misstatement

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The measurement of the auditor's assessment of the susceptibility of an assertion to material misstatement, before considering the effectiveness of related internal controls is defined as

(Multiple Choice)

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Question 61

Significant risks often relate to routine transactions.

(True/False)

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Question 62

The audit committee should determine the risk the CPA firm is willing to take that the financial statements are misstated after the audit is completed.

(True/False)

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Question 63

________ risk represents the auditor's assessment of the susceptibility of an assertion to material misstatement, before considering the effectiveness of the client's internal controls.

(Multiple Choice)

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Question 64

Performance materiality impacts inherent risk and control risk.

(True/False)

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Question 65

If planned detection risk is reduced, the amount of evidence the auditor accumulates will

(Multiple Choice)

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Question 66

Which of the following is not a primary consideration when assessing inherent risk?

(Multiple Choice)

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Question 67

If the audit assurance rate is 95%, then the level of acceptable audit risk is 5%.

(True/False)

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Question 68

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

(True/False)

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Question 69

Financial statement matters like estimates for the allowance for doubtful accounts and allowances for slow-moving inventories, are deemed significant matters which should be addressed by auditor in their assessment of the risk of material misstatement.

(True/False)

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Question 70

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

(Essay)

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Question 71

Significant changes in the industry may increase the risk of material misstatement at the assertion level.

(True/False)

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Question 72

Overall assessment of acceptable audit risk is highly subjective.

(True/False)

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Question 73

Name some examples where the auditor accepts some level of uncertainty in performing the audit function.

(Essay)

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Question 74

Which of the following is an accurate statement regarding inherent risk?

(Multiple Choice)

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Question 75

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

(Multiple Choice)

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Question 76

Inherent risk is related to planned detection risk and related to the amount of audit evidence.

(Multiple Choice)

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Question 77

The risk of material misstatement refers to

(Multiple Choice)

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Question 78

When using the audit risk model,

(Multiple Choice)

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Question 79

Which of the following is a correct relationship?

(Multiple Choice)

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Question 80

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Exam 9: Assessing the Risk of Material Misstatement

The measurement of the auditor's assessment of the susceptibility of an assertion to material misstatement, before considering the effectiveness of related internal controls is defined as

Significant risks often relate to routine transactions.

The audit committee should determine the risk the CPA firm is willing to take that the financial statements are misstated after the audit is completed.

________ risk represents the auditor's assessment of the susceptibility of an assertion to material misstatement, before considering the effectiveness of the client's internal controls.

Performance materiality impacts inherent risk and control risk.

If planned detection risk is reduced, the amount of evidence the auditor accumulates will

Which of the following is not a primary consideration when assessing inherent risk?

If the audit assurance rate is 95%, then the level of acceptable audit risk is 5%.

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

Financial statement matters like estimates for the allowance for doubtful accounts and allowances for slow-moving inventories, are deemed significant matters which should be addressed by auditor in their assessment of the risk of material misstatement.

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

Significant changes in the industry may increase the risk of material misstatement at the assertion level.

Overall assessment of acceptable audit risk is highly subjective.

Name some examples where the auditor accepts some level of uncertainty in performing the audit function.

Which of the following is an accurate statement regarding inherent 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

Inherent risk is ________ related to planned detection risk and ________ related to the amount of audit evidence.

The risk of material misstatement refers to

When using the audit risk model,

Which of the following is a correct relationship?

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 Materiality

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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

Inherent risk is related to planned detection risk and related to the amount of audit evidence.