Question 1

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the

Accepted Answer

A) Factors that raise doubts about the auditability of the financial statements. 
B) Operating effectiveness of internal control policies and procedures. 
C) Risk that material misstatements exist in the financial statements. 
D) Possibility that the nature and extent of substantive tests may be reduced. 
A) Factors that raise doubts about the auditability of the financial statements. 
B) Operating effectiveness of internal control policies and procedures. 
C) Risk that material misstatements exist in the financial statements. 
D) Possibility that the nature and extent of substantive tests may be reduced.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

What is the connection between communication and internal control?

Accepted Answer

Communication involves providing an unde

Question 4

Control risk is the probability that audit procedures will fail to detect material misstatements in the financial statements.

Accepted Answer

A) True 
 B)False

Question 5

An auditor's begins the identification of business risks by doing what?

Accepted Answer

A) Preliminary analysis 
B) Financial analysis 
C) Strategic analysis 
D) Horizontal analysis 
A) Preliminary analysis 
B) Financial analysis 
C) Strategic analysis 
D) Horizontal analysis

Question 6

In an overall audit risk is the probability that an auditor will give an inappropriate opinion on financial statements.

Accepted Answer

A) True 
 B)False

Question 7

When an auditor increases the planned assessed level of control risk because certain control procedures were determined to be ineffective, the auditor would most likely increase the

Accepted Answer

A) Extent of tests of details. 
B) Level of inherent risk. 
C) Extent of tests of controls. 
D) Level of detection risk. 
A) Extent of tests of details. 
B) Level of inherent risk. 
C) Extent of tests of controls. 
D) Level of detection risk.

Question 8

Internal control includes the following components:

Accepted Answer

A) Control activities and inherent risks. 
B) Information systems and external influences. 
C) The control environment and risk assessment processes. 
D) Financial reporting and control activities. 
A) Control activities and inherent risks. 
B) Information systems and external influences. 
C) The control environment and risk assessment processes. 
D) Financial reporting and control activities.

Question 9

An auditor can broadly define controls as:

Accepted Answer

A) Those elements of an organization that taken together support people in achieving an organization's objectives. 
B) Those systems, processes and procedures which prevent fraud. 
C) Key performance indicators employed by management to measure an organization's success. 
D) The structure and culture of an organization which helps to eliminate risk. 
A) Those elements of an organization that taken together support people in achieving an organization's objectives. 
B) Those systems, processes and procedures which prevent fraud. 
C) Key performance indicators employed by management to measure an organization's success. 
D) The structure and culture of an organization which helps to eliminate risk.

Question 10

If control 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) Inherent risk will increase. 
C) Audit risk will decrease. 
D) Detection risk must decrease. 
A) Detection risk must increase. 
B) Inherent risk will increase. 
C) Audit risk will decrease. 
D) Detection risk must decrease.

Question 11

Management's philosophy and operating style has to do with how the business is operated and is not part of the internal control environment.

Accepted Answer

A) True 
 B)False

Question 12

An auditor considers two factors in understanding business risks.They are:

Accepted Answer

A) The likelihood of a risk occurring and the materiality of the risk. 
B) The magnitude of the risk and the type of risk. 
C) The likelihood of the risk occurring and the type of risk. 
D) The likelihood of a risk occurring and the magnitude the risk. 
A) The likelihood of a risk occurring and the materiality of the risk. 
B) The magnitude of the risk and the type of risk. 
C) The likelihood of the risk occurring and the type of risk. 
D) The likelihood of a risk occurring and the magnitude the risk.

Question 13

The existence of audit risk is recognized by the statement in the auditor's standard report that the auditor

Accepted Answer

A) Obtains reasonable assurance about whether the financial statements are free of material misstatement. 
B) Assesses the accounting principles used and also evaluates the overall financial statement presentation. 
C) Realizes some matters, either individually or in the aggregate, are important while other matters are not important. 
D) Is responsible for expressing an opinion on the financial statements, which are the responsibility of management. 
A) Obtains reasonable assurance about whether the financial statements are free of material misstatement. 
B) Assesses the accounting principles used and also evaluates the overall financial statement presentation. 
C) Realizes some matters, either individually or in the aggregate, are important while other matters are not important. 
D) Is responsible for expressing an opinion on the financial statements, which are the responsibility of management.

Question 14

On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned.To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would

Accepted Answer

A) Decrease substantive testing. 
B) Decrease detection risk. 
C) Increase inherent risk. 
D) Increase materiality levels. 
A) Decrease substantive testing. 
B) Decrease detection risk. 
C) Increase inherent risk. 
D) Increase materiality levels.

Question 15

A critical element of control is monitoring.What is likely to happen if management fails to monitor an internal control?

Accepted Answer

A) Necessary improvements will not be identified. 
B) Personnel are likely to stop observing the control. 
C) The inherent risk of an error will increase. 
D) The auditor is likely to assume the control is working when it might not be. 
A) Necessary improvements will not be identified. 
B) Personnel are likely to stop observing the control. 
C) The inherent risk of an error will increase. 
D) The auditor is likely to assume the control is working when it might not be.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The acceptable level of detection risk is inversely related to the

Accepted Answer

A) Assurance provided by substantive tests. 
B) Risk of misapplying auditing procedures. 
C) Preliminary judgment about materiality levels. 
D) Risk of failing to discover material misstatements. 
A) Assurance provided by substantive tests. 
B) Risk of misapplying auditing procedures. 
C) Preliminary judgment about materiality levels. 
D) Risk of failing to discover material misstatements.

Question 18

The business process view also highlights the fact that business organizations:

Accepted Answer

A) Differ in terms of the technology they use. 
B) Essentially all perform the same activities. 
C) Should simplify their business to follow clear rules. 
D) Work best when run as a hierarchy. 
A) Differ in terms of the technology they use. 
B) Essentially all perform the same activities. 
C) Should simplify their business to follow clear rules. 
D) Work best when run as a hierarchy.

Question 19

An organization with a very hierarchical structure is typical of companies in complex business environments as this structure reduces the ability of a junior employee to make a wrong decision.

Accepted Answer

A) True 
 B)False

Question 20

Company-level controls can have a big impact on a company's financial reporting.

Accepted Answer

A) True 
 B)False

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the

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

What is the connection between communication and internal control?

Control risk is the probability that audit procedures will fail to detect material misstatements in the financial statements.

An auditor's begins the identification of business risks by doing what?

In an overall audit risk is the probability that an auditor will give an inappropriate opinion on financial statements.

When an auditor increases the planned assessed level of control risk because certain control procedures were determined to be ineffective, the auditor would most likely increase the

Internal control includes the following components:

An auditor can broadly define controls as:

If control 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?

Management's philosophy and operating style has to do with how the business is operated and is not part of the internal control environment.

An auditor considers two factors in understanding business risks.They are:

The existence of audit risk is recognized by the statement in the auditor's standard report that the auditor

On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned.To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would

A critical element of control is monitoring.What is likely to happen if management fails to monitor an internal control?

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

The acceptable level of detection risk is inversely related to the

The business process view also highlights the fact that business organizations:

An organization with a very hierarchical structure is typical of companies in complex business environments as this structure reduces the ability of a junior employee to make a wrong decision.

Company-level controls can have a big impact on a company's financial reporting.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters

Exam 7: Assessing Risks and Internal Control

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the

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

What is the connection between communication and internal control?

Control risk is the probability that audit procedures will fail to detect material misstatements in the financial statements.

An auditor's begins the identification of business risks by doing what?

In an overall audit risk is the probability that an auditor will give an inappropriate opinion on financial statements.

When an auditor increases the planned assessed level of control risk because certain control procedures were determined to be ineffective, the auditor would most likely increase the

Internal control includes the following components:

An auditor can broadly define controls as:

If control 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?

Management's philosophy and operating style has to do with how the business is operated and is not part of the internal control environment.

An auditor considers two factors in understanding business risks.They are:

The existence of audit risk is recognized by the statement in the auditor's standard report that the auditor

On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned.To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would

A critical element of control is monitoring.What is likely to happen if management fails to monitor an internal control?

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

The acceptable level of detection risk is inversely related to the

The business process view also highlights the fact that business organizations:

An organization with a very hierarchical structure is typical of companies in complex business environments as this structure reduces the ability of a junior employee to make a wrong decision.

Company-level controls can have a big impact on a company's financial reporting.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters