Question 1

When allocating materiality,most practitioners choose to allocate to:

Accepted Answer

A)  the income statement accounts because they are more important. 
B)  the balance sheet accounts because most audits focus on the balance sheet. 
C)  both balance sheet and income statement accounts because there could be errors on either. 
D)  all of the financial statements because it is required by GAAS. 
A)  the income statement accounts because they are more important. 
B)  the balance sheet accounts because most audits focus on the balance sheet. 
C)  both balance sheet and income statement accounts because there could be errors on either. 
D)  all of the financial statements because it is required by GAAS.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Determining materiality requires professional judgment.

Accepted Answer

A) True 
 B)False

Question 4

To maximize audit efficiency,the auditor should allocate less tolerable misstatement to accounts that can be verified by using low-cost audit procedures,such as analytical procedures,than to accounts that are more costly to audit.

Accepted Answer

A) True 
 B)False

Question 5

Auditors are ________ to document the known and likely misstatements in the financial statements under audit.

Accepted Answer

A)  permitted 
B)  required 
C)  not allowed 
D)  strongly encouraged 
A)  permitted 
B)  required 
C)  not allowed 
D)  strongly encouraged

Question 6

When auditors allocate the preliminary judgment about materiality to account balances,the materiality allocated to any given account balance is referred to as:

Accepted Answer

A)  the materiality range. 
B)  the error range. 
C)  tolerable materiality. 
D)  performance materiality. 
A)  the materiality range. 
B)  the error range. 
C)  tolerable materiality. 
D)  performance materiality.

Question 7

The risk of fraud should be assessed for the entire audit as well as by cycle,account,and objective.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is not true?

Accepted Answer

A)  Inherent risk is inversely related to the amount of audit evidence whereas detection risk is directly related to the amount of audit evidence required. 
B)  Inherent risk is directly related to evidence whereas detection risk is inversely related to the amount of audit evidence required. 
C)  Inherent risk is the susceptibility of the financial statements to material error, assuming no internal controls. 
D)  Inherent risk and control risk are assessed by the auditor and function independently of the financial statement audit. 
A)  Inherent risk is inversely related to the amount of audit evidence whereas detection risk is directly related to the amount of audit evidence required. 
B)  Inherent risk is directly related to evidence whereas detection risk is inversely related to the amount of audit evidence required. 
C)  Inherent risk is the susceptibility of the financial statements to material error, assuming no internal controls. 
D)  Inherent risk and control risk are assessed by the auditor and function independently of the financial statement audit.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The audit risk model that must be used for planning audit procedures and evaluating audit results is:   = AAR.

Accepted Answer

A) True 
 B)False

Question 11

Audit assurance is the complement of planned detection risk,that is,one minus planned detection risk.

Accepted Answer

A) True 
 B)False

Question 12

The primary purpose of allocating the preliminary judgment about materiality to financial statement accounts is to help the auditor decide the appropriate evidence to accumulate.

Accepted Answer

A) True 
 B)False

Question 13

When dealing with audit risk:

Accepted Answer

A)  auditors accept some level of risk in performing the audit function. 
B)  most risks that auditors encounter are relatively easy to measure. 
C)  the audit risk model is only used for classes of transactions. 
D)  most audit firms prefer to use a quantitative assessment for risk. 
A)  auditors accept some level of risk in performing the audit function. 
B)  most risks that auditors encounter are relatively easy to measure. 
C)  the audit risk model is only used for classes of transactions. 
D)  most audit firms prefer to use a quantitative assessment for risk.

When allocating materiality,most practitioners choose to allocate to:

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

Determining materiality requires professional judgment.

To maximize audit efficiency,the auditor should allocate less tolerable misstatement to accounts that can be verified by using low-cost audit procedures,such as analytical procedures,than to accounts that are more costly to audit.

Auditors are ________ to document the known and likely misstatements in the financial statements under audit.

When auditors allocate the preliminary judgment about materiality to account balances,the materiality allocated to any given account balance is referred to as:

The risk of fraud should be assessed for the entire audit as well as by cycle,account,and objective.

Which of the following statements is not true?

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

The audit risk model that must be used for planning audit procedures and evaluating audit results is: = AAR.

Audit assurance is the complement of planned detection risk,that is,one minus planned detection risk.

The primary purpose of allocating the preliminary judgment about materiality to financial statement accounts is to help the auditor decide the appropriate evidence to accumulate.

When dealing with audit risk:

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters

Exam 9: Considering Materiality and Audit Risk

When allocating materiality,most practitioners choose to allocate to:

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

Determining materiality requires professional judgment.

To maximize audit efficiency,the auditor should allocate less tolerable misstatement to accounts that can be verified by using low-cost audit procedures,such as analytical procedures,than to accounts that are more costly to audit.

Auditors are ________ to document the known and likely misstatements in the financial statements under audit.

When auditors allocate the preliminary judgment about materiality to account balances,the materiality allocated to any given account balance is referred to as:

The risk of fraud should be assessed for the entire audit as well as by cycle,account,and objective.

Which of the following statements is not true?

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

The audit risk model that must be used for planning audit procedures and evaluating audit results is: = AAR.

Audit assurance is the complement of planned detection risk,that is,one minus planned detection risk.

The primary purpose of allocating the preliminary judgment about materiality to financial statement accounts is to help the auditor decide the appropriate evidence to accumulate.

When dealing with audit risk:

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters