Question 1

A ________ risk represents an identified and assessed risk of material misstatement that,in the auditor's professional judgment,requires special audit consideration.

Accepted Answer

A) material 
B) substantial 
C) financial statement 
D) significant 
A) material 
B) substantial 
C) financial statement 
D) significant

Question 2

In applying the audit risk model,auditors are concerned about overstatements,not understatements.

Accepted Answer

A) True 
 B)False

Question 3

Planned detection risk I. determines the amount of substantive evidence the auditor plans to accumulate.
II) is dependent on inherent risk and business risk.

Accepted Answer

A) I only 
B) II only 
C) I and II 
D) neither I nor II 
A) I only 
B) II only 
C) I and II 
D) neither I nor II

Question 4

Match between columns
                        Premises: a measure of the risk that audit evidence for a segment will fail to detect misstatements exceeding the performance materiality amount
This term is synonymous with acceptable audit risk.
a measure of the auditor's assessment of the likelihood that there are material misstatements before considering the effectiveness of internal control
the maximum amount by which the auditor believes that the statements could be misstated and still not affect the decisions of reasonable users
a measure of how much risk the auditor is willing to take that the financial statements may be materially misstated after the audit is completed and an unqualified audit opinion has been issued
the magnitude of an omission or misstatement of accounting information that makes it probable that the judgment of a reasonable person would have been changed
the materiality allocated to any given account balance
a measure of the auditor's assessment of the likelihood that misstatements exceeding a performance materiality in a segment will not be prevented or detected by the client's internal controls

Accepted Answer

The Answer of acceptable audit risk and planned detection risk is...

Question 5

When considering the risk of misstatement due to fraud,

Accepted Answer

A) the risk of not detecting a material misstatement due to fraud is lower than the risk of not detecting a misstatement due to error. 
B) the risk is only made at the financial statement level. 
C) auditing standards require the auditor to presume that risk of fraud exist in expense transactions. 
D) auditing standards outline procedures the auditor should perform to obtain information from management about their consideration of fraud. 
A) the risk of not detecting a material misstatement due to fraud is lower than the risk of not detecting a misstatement due to error. 
B) the risk is only made at the financial statement level. 
C) auditing standards require the auditor to presume that risk of fraud exist in expense transactions. 
D) auditing standards outline procedures the auditor should perform to obtain information from management about their consideration of fraud.

Question 6

One major limitation in the application of the audit risk model is the difficulty of measuring the components of the model.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a primary consideration when assessing inherent risk?

Accepted Answer

A) nature of client's business 
B) existence of related parties 
C) effectiveness of internal controls 
D) susceptibility to misappropriation of assets 
A) nature of client's business 
B) existence of related parties 
C) effectiveness of internal controls 
D) susceptibility to misappropriation of assets

Question 8

________ is the risk that the auditor or audit firm will suffer harm after the audit is finished,even though the audit report was correct.

Accepted Answer

A) Inherent risk 
B) Audit risk 
C) Engagement risk 
D) Control risk 
A) Inherent risk 
B) Audit risk 
C) Engagement risk 
D) Control risk

Question 9

In a financial statement audit,inherent risk is evaluated to help an auditor asses which of the following?

Accepted Answer

A) the internal audit department's objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee 
B) the risk the internal control system will not detect a material misstatement of a financial statement assertion 
C) the risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion 
D) the susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls 
A) the internal audit department's objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee 
B) the risk the internal control system will not detect a material misstatement of a financial statement assertion 
C) the risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion 
D) the susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls

Question 10

Significant changes in the industry may increase the risk of material misstatement at the assertion level.

Accepted Answer

A) True 
 B)False

Question 11

If acceptable audit risk is low,and inherent risk and control risk are both low,then planned detection risk should be high.

Accepted Answer

A) True 
 B)False

Question 12

There is a direct relationship between acceptable audit risk and planned detection risk.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements regarding inherent risk is correct?

Accepted Answer

A) Inherent risk is unaffected by the auditor's experience with client's organization. 
B) Most auditors set a low inherent risk in the first year of an audit and increase it if experience shows that it was incorrect. 
C) Most auditors set a high inherent risk in the first year of an audit and reduce it in subsequent years as they gain more knowledge about the company. 
D) Inherent risk is dependent upon the strengths in client's internal control system. 
A) Inherent risk is unaffected by the auditor's experience with client's organization. 
B) Most auditors set a low inherent risk in the first year of an audit and increase it if experience shows that it was incorrect. 
C) Most auditors set a high inherent risk in the first year of an audit and reduce it in subsequent years as they gain more knowledge about the company. 
D) Inherent risk is dependent upon the strengths in client's internal control system.

Question 14

Which of the following is a correct statement?

Accepted Answer

A) There is no relationship between materiality and risk in auditing. 
B) Risk is a measure of magnitude or size. 
C) The combination of performance materiality and the audit risk model factors determines planned audit evidence. 
D) Performance materiality is part of the audit risk model. 
A) There is no relationship between materiality and risk in auditing. 
B) Risk is a measure of magnitude or size. 
C) The combination of performance materiality and the audit risk model factors determines planned audit evidence. 
D) Performance materiality is part of the audit risk model.

Question 15

To what extent do auditors typically rely on internal controls of their public company clients?

Accepted Answer

A) extensively 
B) only very little 
C) infrequently 
D) never 
A) extensively 
B) only very little 
C) infrequently 
D) never

Question 16

Risk of material misstatement at the assertion level

Accepted Answer

A) is only relevant to account balances. 
B) determines the nature,timing,and extent of further audit procedures. 
C) refers to risks that are pervasive to the financial statements as a whole. 
D) consists of business risk and inherent risk. 
A) is only relevant to account balances. 
B) determines the nature,timing,and extent of further audit procedures. 
C) refers to risks that are pervasive to the financial statements as a whole. 
D) consists of business risk and inherent risk.

Question 17

If the audit assurance rate is 95%,then the level of acceptable audit risk is 5%.

Accepted Answer

A) True 
 B)False

Question 18

Auditors respond to risk primarily by I. changing the extent of testing.
II) changing the types of audit procedures.

Accepted Answer

A) I only 
B) II only 
C) I and II 
D) neither I nor II 
A) I only 
B) II only 
C) I and II 
D) neither I nor II

Question 19

Inherent risk and control risk

Accepted Answer

A) are inversely related to each other. 
B) are inversely related to detection risk. 
C) are directly related to detection risk. 
D) are directly related to audit risk. 
A) are inversely related to each other. 
B) are inversely related to detection risk. 
C) are directly related to detection risk. 
D) are directly related to audit risk.

Question 20

Performance materiality impacts inherent risk and control risk.

Accepted Answer

A) True 
 B)False

Exam 9: Materiality and Risk

A ________ risk represents an identified and assessed risk of material misstatement that,in the auditor's professional judgment,requires special audit consideration.

In applying the audit risk model,auditors are concerned about overstatements,not understatements.

Planned detection risk I. determines the amount of substantive evidence the auditor plans to accumulate. II) is dependent on inherent risk and business risk.

When considering the risk of misstatement due to fraud,

One major limitation in the application of the audit risk model is the difficulty of measuring the components of the model.

Which of the following is not a primary consideration when assessing inherent risk?

________ is the risk that the auditor or audit firm will suffer harm after the audit is finished,even though the audit report was correct.

In a financial statement audit,inherent risk is evaluated to help an auditor asses which of the following?

Significant changes in the industry may increase the risk of material misstatement at the assertion level.

If acceptable audit risk is low,and inherent risk and control risk are both low,then planned detection risk should be high.

There is a direct relationship between acceptable audit risk and planned detection risk.

Which of the following statements regarding inherent risk is correct?

Which of the following is a correct statement?

To what extent do auditors typically rely on internal controls of their public company clients?

Risk of material misstatement at the assertion level

If the audit assurance rate is 95%,then the level of acceptable audit risk is 5%.

Auditors respond to risk primarily by I. changing the extent of testing. II) changing the types of audit procedures.

Inherent risk and control risk

Performance materiality impacts inherent risk and control risk.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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