Exam 7: Assessing Specific Business Risk

Which of the audit procedures listed below would be least likely to disclose the existence of related-party transactions of a client during the period under audit?

Which of the following inventory items is likely to have high inherent risk?

Which of the following actions cannot be taken by the auditors to reduce audit risk?

Which of the following conditions or events would most likely cause an auditor to have substantial doubt about an entity's ability to continue as a going concern?

The auditor is most likely to presume that a high risk of a fraud exists if:

The allowance for undetected misstatement is the preliminary judgment about materiality for the financial report minus the:

An example of a transaction that may be indicative of the existence of related parties is:

Which of the following factors would most likely heighten an auditor's concern about the risk of fraudulent financial reporting?

If, as a result of auditing procedures, an auditor believes that a client may have committed illegal acts, which of the following actions should be taken immediately by the auditor?

Your preliminary audit plan for Solar Ltd states that planning materiality is set at one per cent of total assets. This planning materiality amount:

When the auditor concludes, based on information obtained and, if necessary, consultation with legal advisers, that an illegal act has or is likely to have occurred, the auditor should:

Which of the following is not a qualitative factor that may affect an auditor's establishment of materiality?

With respect to illegal acts, the auditor's responsibility is to:

With respect to fraud and error, which of the following should be part of an auditor's planning of the audit engagement?

For a reporting entity that has participated in related-party transactions that are material, disclosure in the financial report should include:

If the auditor considers an illegal act to be sufficiently serious to warrant withdrawing from the engagement, the auditor should:

An independent auditor finds that Hollow Pty Ltd occupies office space, at no charge, in an office building owned by a shareholder of Hollow Pty Ltd. This finding indicates the existence of:

Your audit client has a new management incentive scheme in place, with the bonus calculated on the basis of the increase in net profit over the previous year. The basis of the bonus will remain the same for the next three years. Your client has had a poor year and will not meet its budget or last year's net profit. Which of the following represents an inherent risk?

Some account balances, such as those for foreign currency transactions or leases, are the results of complex calculations.The susceptibility to material misstatements in these types of accounts is defined as:

The auditor can respond to an increased risk of fraud by doing all of the following except: