Exam 5: Overview of the Audit Process

When the auditor has sufficient competent evidence for each assertion in a material account balance or transaction class, the auditor has completed that portion of the audit and moves on to the next task.

Many industries have specific accounting and audit guides.

The primary communication of audit findings is contained in the auditor's report on financial statements.

Reasonableness of management's accounting estimates is covered by the existence or occurrence assertion.

Following are definitions of related types of risk. REQUIRED: For each of the following, indicate the type of risk that is defined. Use the following codes: A:Audit Risk C:Control Risk I:Inherent Risk D:Detection Risk 1.The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity's internal controls. 2.The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that contain a material misstatement. 3.The risk that the auditor will not detect a material misstatement that exists in an assertion. 4.The susceptibility of an assertion to a material misstatement assuming that there are no related internal controls.

CPAs who perform audit services also provide a variety of other services to clients.

Inherent risk is defined in terms of:

Procedures to obtain an understanding of the internal control structure are required in every financial statement audit.

Understandability is defined as the quality of information that allows users to perceive its significance.

Which of these is not a category of substantive tests?

The existence assertion pertains to whether items included in inventory are valid but does not extend to whether the reported dollar amount is the correct amount for the inventory items.

Which one of the following is among the three components of audit risk?

Identify and define the components of the audit risk model.

The overall objective of a financial statement audit is the expression of an opinion on whether the client's financial statements are presented fairly, in all material respects, in conformity with GAAS.

Which one of the following assertions is not made by management in placing an item in the financial statements?

Which of these is not a risk factor?

Which one of the following reports serves as the primary communication of audit findings?

The concept of materiality is defined by the Financial Accounting Standards Board in terms of the judgment of the:

In the financial statements, management implicitly asserts that the components are properly presented and accompanying disclosures are adequate.

The final key element of the audit involves communication of findings.