Question 1

Calibration is achieved through repetition and feedback,which improves the quality of expert's estimates.

Accepted Answer

A) True 
 B)False  True

Question 2

Accounting estimate nirvana is ________.

Accepted Answer

A) the width of the reasonable range is greater than the material misstatement but not greater than two times the material misstatement,which means an estimate with no significant risk can be found within the reasonable range 
B) the width of the reasonable range is less than or equal to the material misstatement,which means that there is no significant risk for any estimates within the reasonable range 
C) the width of reasonable range is greater than or equal to the material misstatement,which means that there is no significant risk for any estimates within the reasonable range 
D) the width of reasonable range is less than the material misstatement but not greater than two times the material misstatement,which means an estimate with no significant risk can be found within the reasonable range 
A) the width of the reasonable range is greater than the material misstatement but not greater than two times the material misstatement,which means an estimate with no significant risk can be found within the reasonable range 
B) the width of the reasonable range is less than or equal to the material misstatement,which means that there is no significant risk for any estimates within the reasonable range 
C) the width of reasonable range is greater than or equal to the material misstatement,which means that there is no significant risk for any estimates within the reasonable range 
D) the width of reasonable range is less than the material misstatement but not greater than two times the material misstatement,which means an estimate with no significant risk can be found within the reasonable range B

Question 3

Under Canadian audit standard CAS 706,the auditor may decide to place a "red flag" paragraph drawing attention to the uncertainty in the report.If there is material uncertainty about the going-concern assumption,for example,then CAS 706 requires that an emphasis of matter paragraph be added even when there is proper disclosure in the financial statements.Under what circumstances would uncertainty situations cause audit reports to be qualified for departures from GAAP?

Accepted Answer

Uncertainty situations may cause audit reports to be qualified for departures from GAAP,if (1)management's disclosure of the uncertainty is inadequate, (2)management uses inappropriate accounting principles to account for the uncertainty,or (3)management makes unreasonable accounting estimates in connection with the effects of the uncertainty.The audit report also may be qualified because of a scope limitation regarding available evidence about an uncertainty.

Question 4

Which of the following statements regarding calibration is FALSE?

Accepted Answer

A) A calibrated person is one who,when asked a large number of questions,will get about as many correct as he or she expected. 
B) An uncalibrated person who is systematically overconfident may be 90% confident of his or her correctness over a large number of questions,where in the end that person will only get 60% or 70% of them correct. 
C) Calibration is achieved through the use of heuristics,which improves the quality of experts' estimates. 
D) If the environment is predictable and an expert has learned through calibration training to identify the situations where intuition misleads him or her,then the feedback will have corrected the expert's intuitions. 
A) A calibrated person is one who,when asked a large number of questions,will get about as many correct as he or she expected. 
B) An uncalibrated person who is systematically overconfident may be 90% confident of his or her correctness over a large number of questions,where in the end that person will only get 60% or 70% of them correct. 
C) Calibration is achieved through the use of heuristics,which improves the quality of experts' estimates. 
D) If the environment is predictable and an expert has learned through calibration training to identify the situations where intuition misleads him or her,then the feedback will have corrected the expert's intuitions.

Question 5

Auditors are susceptible to judgmental biases because of the use of shortcuts or heuristics in the reasoning process.

Accepted Answer

A) True 
 B)False

Question 6

It is "reasonable" to assume the going-concern assumption for financial reporting when the degree of doubt is no higher than ________.

Accepted Answer

A) 50% 
B) 80% 
C) 20% 
D) 10% 
A) 50% 
B) 80% 
C) 20% 
D) 10%

Question 7

AccR is largely geared to reflect business risks of the auditee.

Accepted Answer

A) True 
 B)False

Question 8

Accounting estimate nirvana occurs when the width of the reasonable range is less than or equal to the material misstatement,which means that there is no significant risk for any estimates within the reasonable range.

Accepted Answer

A) True 
 B)False

Question 9

The difference between what was reported and what should have been reported,an auditor's traditional perspective of misstatement,is the basis of the concept of auditing risk.

Accepted Answer

A) True 
 B)False

Question 10

A(n)________ is an existing condition,or situation,involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.

Accepted Answer

A) going concern 
B) estimate 
C) management bias 
D) contingency 
A) going concern 
B) estimate 
C) management bias 
D) contingency

Question 11

The tendency to exaggerate the inevitability of causal sequences is known as the availability heuristic.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements regarding audit risk (AudR)and accounting risk (AccR)is FALSE?

Accepted Answer

A) AccR is largely geared to reflect business risks of the auditee. 
B) AccR is the material difference between an estimate involving future events and its outcome. 
C) AudR is something that is relevant to the auditee but not to the auditor. 
D) The auditor has to consider both AudR and AccR and somehow combine them using professional judgment. 
A) AccR is largely geared to reflect business risks of the auditee. 
B) AccR is the material difference between an estimate involving future events and its outcome. 
C) AudR is something that is relevant to the auditee but not to the auditor. 
D) The auditor has to consider both AudR and AccR and somehow combine them using professional judgment.

Question 13

The tendency to value what we have because it is ours,regardless of its intrinsic value,is known as the ________.

Accepted Answer

A) endowment effect 
B) availability heuristic 
C) representative heuristic 
D) halo effect 
A) endowment effect 
B) availability heuristic 
C) representative heuristic 
D) halo effect

Question 14

What are the key concepts and related definitions relating to CAS 540.07?

Accepted Answer

(a)Accounting estimate-an approximation

Question 15

From Cockburn's perspective,which of the following statements is FALSE?

Accepted Answer

A) Reasonable ranges were getting too narrow. 
B) Reasonable ranges were getting too wide. 
C) Reasonable ranges are crucial for deciding if there is a misstatement in accounting estimates. 
D) Auditors must consider the riskiness of the accounting estimates. 
A) Reasonable ranges were getting too narrow. 
B) Reasonable ranges were getting too wide. 
C) Reasonable ranges are crucial for deciding if there is a misstatement in accounting estimates. 
D) Auditors must consider the riskiness of the accounting estimates.

Question 16

In CAS 540,quantified uncertainty is referred to as probability or risk.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements regarding the RBR matrix is FALSE?

Accepted Answer

A) The RBR matrix is an attempt to summarize all the possibilities of accounting uncertainties that an auditor may encounter and classify them by reporting types. 
B) The RBR matrix focuses on AudR levels. 
C) Under the RBR system of risk-based reasoning for accounting estimates,there are three possible ranges or regions of probabilities of payoffs to consider. 
D) The main use of the RBR matrix is to provide a convenient decision aid for any reporting situation involving future events. 
A) The RBR matrix is an attempt to summarize all the possibilities of accounting uncertainties that an auditor may encounter and classify them by reporting types. 
B) The RBR matrix focuses on AudR levels. 
C) Under the RBR system of risk-based reasoning for accounting estimates,there are three possible ranges or regions of probabilities of payoffs to consider. 
D) The main use of the RBR matrix is to provide a convenient decision aid for any reporting situation involving future events.

Question 18

CIFiR's progress report proposes a framework for accounting judgments consisting of which two components?

Accepted Answer

A) A critical and good-faith thought process and documentation. 
B) Calibration and estimation. 
C) Professional accounting judgment and professional auditing judgment. 
D) Heuristics and accounting risk. 
A) A critical and good-faith thought process and documentation. 
B) Calibration and estimation. 
C) Professional accounting judgment and professional auditing judgment. 
D) Heuristics and accounting risk.

Question 19

The nature of any adjustment depends on how wide the range is,as was first noted by Cockburn.Whether the reasonable range (RR)is sufficiently narrow is determined by the level of acceptable accounting risk (AccR).What are the generic rules of thumb for high-assurance engagements involving reasonable ranges that capture high probabilities of future outcomes?

Accepted Answer

These rules,using MM to represent materi

Question 20

A lack of neutrality by management in the preparation and presentation of information is known as estimation uncertainty.

Accepted Answer

A) True 
 B)False

Calibration is achieved through repetition and feedback,which improves the quality of expert's estimates.

Accounting estimate nirvana is ________.

Which of the following statements regarding calibration is FALSE?

Auditors are susceptible to judgmental biases because of the use of shortcuts or heuristics in the reasoning process.

It is "reasonable" to assume the going-concern assumption for financial reporting when the degree of doubt is no higher than ________.

AccR is largely geared to reflect business risks of the auditee.

Accounting estimate nirvana occurs when the width of the reasonable range is less than or equal to the material misstatement,which means that there is no significant risk for any estimates within the reasonable range.

The difference between what was reported and what should have been reported,an auditor's traditional perspective of misstatement,is the basis of the concept of auditing risk.

A(n)________ is an existing condition,or situation,involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.

The tendency to exaggerate the inevitability of causal sequences is known as the availability heuristic.

Which of the following statements regarding audit risk (AudR)and accounting risk (AccR)is FALSE?

The tendency to value what we have because it is ours,regardless of its intrinsic value,is known as the ________.

What are the key concepts and related definitions relating to CAS 540.07?

From Cockburn's perspective,which of the following statements is FALSE?

In CAS 540,quantified uncertainty is referred to as probability or risk.

Which of the following statements regarding the RBR matrix is FALSE?

CIFiR's progress report proposes a framework for accounting judgments consisting of which two components?

A lack of neutrality by management in the preparation and presentation of information is known as estimation uncertainty.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters

Exam 19: The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Calibration is achieved through repetition and feedback,which improves the quality of expert's estimates.

Accounting estimate nirvana is ________.

Which of the following statements regarding calibration is FALSE?

Auditors are susceptible to judgmental biases because of the use of shortcuts or heuristics in the reasoning process.

It is "reasonable" to assume the going-concern assumption for financial reporting when the degree of doubt is no higher than ________.

AccR is largely geared to reflect business risks of the auditee.

Accounting estimate nirvana occurs when the width of the reasonable range is less than or equal to the material misstatement,which means that there is no significant risk for any estimates within the reasonable range.

The difference between what was reported and what should have been reported,an auditor's traditional perspective of misstatement,is the basis of the concept of auditing risk.

A(n)________ is an existing condition,or situation,involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.

The tendency to exaggerate the inevitability of causal sequences is known as the availability heuristic.

Which of the following statements regarding audit risk (AudR)and accounting risk (AccR)is FALSE?

The tendency to value what we have because it is ours,regardless of its intrinsic value,is known as the ________.

What are the key concepts and related definitions relating to CAS 540.07?

From Cockburn's perspective,which of the following statements is FALSE?

In CAS 540,quantified uncertainty is referred to as probability or risk.

Which of the following statements regarding the RBR matrix is FALSE?

CIFiR's progress report proposes a framework for accounting judgments consisting of which two components?

A lack of neutrality by management in the preparation and presentation of information is known as estimation uncertainty.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters