Deck 5: Audit Risk, Business Risk, and Audit Planning

Question 1

The auditor is required to discuss with the audit committee whether or not the financial statements are fairly presented and appropriately applied in accordance with:

A) auditing standards
B) ASX requirements
C) accounting standards
D) FRC requirements

Answer 1

accounting standards

Question 2

The auditor will utilise many resources to assess management integrity in the client acceptance process. Which of the following will an auditor most likely refrain from using in this search?

A) predecessor auditor
B) other professionals in the business community
C) public databases
D) social networks

Answer 2

social networks

Question 3

In the audit risk model, which of the risk components can be assessed by the auditor?

A) Inherent risk
B) control risk
C) detection risk
D) both inherent risk and control risk

Answer 3

both inherent risk and control risk

Question 4

In the audit risk model, its risk components are either determined, assessed or manipulated. Which of the following risks are controllable by the auditor?

A) audit risk
B) control risk
C) detection risk
D) both audit risk and detection risk

Question 5

In assessing engagement risk, auditors investigate many factors to reduce such risk. Which of the following factors does not contribute to engagement risk?

A) senior executives with unlimited authority and power
B) inadequate internal control systems
C) a pattern of premature announcement of operating results
D) none of the above