Question 1

________ is the risk that the auditor or audit firm will suffer harm after the audit is finished, even though the audit report was correct.

Accepted Answer

A)  Inherent risk 
B)  Audit risk 
C)  Engagement risk 
D)  Control risk 
A)  Inherent risk 
B)  Audit risk 
C)  Engagement risk 
D)  Control risk

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Dracule Industries is a privately-owned business that sells medical product and devices to hospitals, clinics and the public. Certain changes have occurred in Dracule Industries during the year undergoing the audit. Harker needs to evaluate the effect these changes have on audit risk. Audit risk at the financial statement level is influenced by the risk of material misstatement; which include factors related to management, the industry and the entity or a combination thereof. For each of the following changes that have occurred during the year under audit identify the appropriate audit response for the list of responses. Each response can be used once, more than once or not at all.

Accepted Answer

1. a
2. a

Question 4

Accounts that require considerable judgment have a higher inherent risk.

Accepted Answer

A) True 
 B)False

Question 5

The auditor's consideration of the risk of material misstatement due to fraud is made primarily at the financial statement level, not at the assertion level.

Accepted Answer

A) True 
 B)False

Question 6

As management is responsible for the financial statements, failure to assess the risk of material misstatement is not detrimental to the auditor.

Accepted Answer

A) True 
 B)False

Question 7

The combination of performance materiality and the audit risk model factors does not affect the auditor's planned audit evidence.

Accepted Answer

A) True 
 B)False

Question 8

PCAOB auditing standards require the auditor to make inquiries of the audit committee about the risks of material misstatement.

Accepted Answer

A) True 
 B)False

Question 9

In a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following?

Accepted Answer

A)  the internal audit department's objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee 
B)  the risk that the internal control system will not detect a material misstatement of a financial statement assertion 
C)  the risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion 
D)  the susceptibility of a financial statement assertion to a material misstatement, assuming there are no related controls 
A)  the internal audit department's objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee 
B)  the risk that the internal control system will not detect a material misstatement of a financial statement assertion 
C)  the risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion 
D)  the susceptibility of a financial statement assertion to a material misstatement, assuming there are no related controls

Question 10

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

Accepted Answer

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

________ is the risk that the auditor or audit firm will suffer harm after the audit is finished, even though the audit report was correct.

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

Accounts that require considerable judgment have a higher inherent risk.

The auditor's consideration of the risk of material misstatement due to fraud is made primarily at the financial statement level, not at the assertion level.

As management is responsible for the financial statements, failure to assess the risk of material misstatement is not detrimental to the auditor.

The combination of performance materiality and the audit risk model factors does not affect the auditor's planned audit evidence.

PCAOB auditing standards require the auditor to make inquiries of the audit committee about the risks of material misstatement.

In a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following?

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

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

Exam 9: Assessing the Risk of Material Misstatement

________ is the risk that the auditor or audit firm will suffer harm after the audit is finished, even though the audit report was correct.

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

Accounts that require considerable judgment have a higher inherent risk.

The auditor's consideration of the risk of material misstatement due to fraud is made primarily at the financial statement level, not at the assertion level.

As management is responsible for the financial statements, failure to assess the risk of material misstatement is not detrimental to the auditor.

The combination of performance materiality and the audit risk model factors does not affect the auditor's planned audit evidence.

PCAOB auditing standards require the auditor to make inquiries of the audit committee about the risks of material misstatement.

In a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following?

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

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