Question 1

Risk should not be tolerated on a cost-benefit basis.

Accepted Answer

A) True 
 B)False

Question 2

Auditors do not create or control detection risk;they can only try to assess its magnitude.

Accepted Answer

A) True 
 B)False

Question 3

Three key management assertions about items on the balance sheet are ________.

Accepted Answer

A) occurrence,completeness,and accuracy 
B) classification,existence,and cut-off 
C) confirmation,presentation,and disclosure 
D) existence,completeness,and presentation 
A) occurrence,completeness,and accuracy 
B) classification,existence,and cut-off 
C) confirmation,presentation,and disclosure 
D) existence,completeness,and presentation

Question 4

If inherent risk increases and all other risks in the audit risk model stay constant (except the one referred to below),which of the following is correct?

Accepted Answer

A) Detection risk must increase. 
B) Control risk will increase. 
C) Audit risk will decrease. 
D) Detection risk must decrease. 
A) Detection risk must increase. 
B) Control risk will increase. 
C) Audit risk will decrease. 
D) Detection risk must decrease.

Question 5

As control risk gets smaller,audit risk gets larger,assuming all other risks stay constant.

Accepted Answer

A) True 
 B)False

Question 6

Business processes can be thought of as a structured set of activities within an entity.

Accepted Answer

A) True 
 B)False

Question 7

The audit objective specifying that "all recorded assets,liabilities,and transactions represent real assets,liabilities,revenues,and expenses" is related most closely to which assertion(s)?

Accepted Answer

A) Existence or occurrence. 
B) Rights and obligations. 
C) Completeness. 
D) Presentation and disclosure. 
A) Existence or occurrence. 
B) Rights and obligations. 
C) Completeness. 
D) Presentation and disclosure.

Question 8

Under GAAS,which of the following is an appropriate justification for accepting to perform an audit when the risk to the auditor from accepting the engagement is high?

Accepted Answer

A) The auditor believes that the audit risk can be reduced to a very low level by performing extensive audit work. 
B) The auditor believes the risk of material misstatement remains low. 
C) The auditor has assessed control risk as low. 
D) The auditor believes the high audit fee outweighs the risk of legal liability from association with the financial statements 
A) The auditor believes that the audit risk can be reduced to a very low level by performing extensive audit work. 
B) The auditor believes the risk of material misstatement remains low. 
C) The auditor has assessed control risk as low. 
D) The auditor believes the high audit fee outweighs the risk of legal liability from association with the financial statements

Question 9

There are two parts to business risk analysis: process analysis and industry analysis.

Accepted Answer

A) True 
 B)False

Question 10

The inclusion in the records of a business of machinery that belongs to a shareholder,is an example of improper application of which financial statement assertion?

Accepted Answer

A) Existence (occurrence) 
B) Completeness 
C) Ownership (rights and obligation) 
D) Presentation (classification and disclosure) 
A) Existence (occurrence) 
B) Completeness 
C) Ownership (rights and obligation) 
D) Presentation (classification and disclosure)

Question 11

Inherent risk and control risk differ from detection risk in that they ________.

Accepted Answer

A) arise from the misapplication of auditing procedures 
B) may be assessed in either quantitative or non-quantitative terms 
C) exist independently of the financial statement audit 
D) can be changed at the auditor's discretion 
A) arise from the misapplication of auditing procedures 
B) may be assessed in either quantitative or non-quantitative terms 
C) exist independently of the financial statement audit 
D) can be changed at the auditor's discretion

Question 12

Which of the following statements best describes the relationship between materiality and audit risk?

Accepted Answer

A) Both materiality and audit risk are directly related to the planned level of substantive procedures to be performed. 
B) Materiality and audit risk are assessed independently of each other. 
C) A higher assessed materiality level results in a higher assessed audit risk level. 
D) A lower assessed materiality level results in a higher assessed audit risk level. 
A) Both materiality and audit risk are directly related to the planned level of substantive procedures to be performed. 
B) Materiality and audit risk are assessed independently of each other. 
C) A higher assessed materiality level results in a higher assessed audit risk level. 
D) A lower assessed materiality level results in a higher assessed audit risk level.

Risk should not be tolerated on a cost-benefit basis.

Auditors do not create or control detection risk;they can only try to assess its magnitude.

Three key management assertions about items on the balance sheet are ________.

If inherent risk increases and all other risks in the audit risk model stay constant (except the one referred to below),which of the following is correct?

As control risk gets smaller,audit risk gets larger,assuming all other risks stay constant.

Business processes can be thought of as a structured set of activities within an entity.

The audit objective specifying that "all recorded assets,liabilities,and transactions represent real assets,liabilities,revenues,and expenses" is related most closely to which assertion(s)?

Under GAAS,which of the following is an appropriate justification for accepting to perform an audit when the risk to the auditor from accepting the engagement is high?

There are two parts to business risk analysis: process analysis and industry analysis.

The inclusion in the records of a business of machinery that belongs to a shareholder,is an example of improper application of which financial statement assertion?

Inherent risk and control risk differ from detection risk in that they ________.

Which of the following statements best describes the relationship between materiality and audit risk?

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

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

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

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

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

Filters

Exam 6: Assessing Risks in an Audit Engagement

Risk should not be tolerated on a cost-benefit basis.

Auditors do not create or control detection risk;they can only try to assess its magnitude.

Three key management assertions about items on the balance sheet are ________.

If inherent risk increases and all other risks in the audit risk model stay constant (except the one referred to below),which of the following is correct?

As control risk gets smaller,audit risk gets larger,assuming all other risks stay constant.

Business processes can be thought of as a structured set of activities within an entity.

The audit objective specifying that "all recorded assets,liabilities,and transactions represent real assets,liabilities,revenues,and expenses" is related most closely to which assertion(s)?

Under GAAS,which of the following is an appropriate justification for accepting to perform an audit when the risk to the auditor from accepting the engagement is high?

There are two parts to business risk analysis: process analysis and industry analysis.

The inclusion in the records of a business of machinery that belongs to a shareholder,is an example of improper application of which financial statement assertion?

Inherent risk and control risk differ from detection risk in that they ________.

Which of the following statements best describes the relationship between materiality and audit risk?

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

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

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

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

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

Filters