Exam 9: Materiality and Risk

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Tolerable misstatement does not affect audit risk, inherent risk, control risk, or planned detection risk yet the combination of the tolerable misstatement and the four risks will determine the amount of planned audit evidence.

(True/False)

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Question 41

Which of the following statements is false?

(Multiple Choice)

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Question 42

In practice, auditors rarely assign numerical probabilities to inherent risk, control risk, or acceptable audit risk. It is more common to assess these risks as high, medium, or low. For each of the four situations below, fill in the blanks for planned detection risk and the amount of evidence you would plan to gather ("planned evidence") using the terms high, medium, or low.

(Essay)

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Question 43

Preliminary judgments about materiality are often changed during the course of the engagement.

(True/False)

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Question 44

Insert risk and control risk are normally assessed for the each segment but sets audit risk at the financial statement level.

(True/False)

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Question 45

Inherent risk and control risk are directly related.

(True/False)

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Question 46

The risk that audit evidence for a segment will fail to detect misstatements exceeding tolerable misstatement is:

(Multiple Choice)

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Question 47

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

(Multiple Choice)

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Question 48

Engagement risk is effectively the audit firm's business risk.

(True/False)

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Question 49

Which of the following statements is true concerning the allocation of preliminary materiality?

(Multiple Choice)

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Question 50

For a private company client, auditors are required to test any internal controls they believe have not been operating effectively during the period under audit.

(True/False)

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Question 51

If it is probable that the judgment of a reasonable person will be changed or influenced by the omission or misstatement of information, then that information is, by definition of FASB Statement No. 2:

(Multiple Choice)

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Question 52

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

(Multiple Choice)

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Question 53

Based on 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:

(Multiple Choice)

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Question 54

Net assets are the most often used base for deciding materiality.

(True/False)

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Question 55

________ misstatements are those where the auditor can determine the amount of the misstatement in the account.

(Multiple Choice)

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Question 56

The risk of material misstatement is a combination of two client controlled factors: inherent risk and control risk. What is inherent risk, why is it important and give examples of inherent risk factors.

(Essay)

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Question 57

Qualitative factors can affect an auditor's assessment of materiality. Which of the following qualitative factors could influence the assessment of materiality? I. Misstatements that are otherwise immaterial may be material if they affect earnings trends. II. Minor misstatements resulting from the consequences of contractual obligations.

(Multiple Choice)

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Question 58

When management has an adequate level of integrity for the auditor to accept the engagement but cannot be regarded as completely honest in all dealings, auditors normally:

(Multiple Choice)

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Question 59

Inherent risk is often high for an account such as:

(Multiple Choice)

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Question 60

Showing 41 - 60 of 102

Exam 9: Materiality and Risk

Tolerable misstatement does not affect audit risk, inherent risk, control risk, or planned detection risk yet the combination of the tolerable misstatement and the four risks will determine the amount of planned audit evidence.

Which of the following statements is false?

Preliminary judgments about materiality are often changed during the course of the engagement.

Insert risk and control risk are normally assessed for the each segment but sets audit risk at the financial statement level.

Inherent risk and control risk are directly related.

The risk that audit evidence for a segment will fail to detect misstatements exceeding tolerable misstatement is:

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

Engagement risk is effectively the audit firm's business risk.

Which of the following statements is true concerning the allocation of preliminary materiality?

For a private company client, auditors are required to test any internal controls they believe have not been operating effectively during the period under audit.

If it is probable that the judgment of a reasonable person will be changed or influenced by the omission or misstatement of information, then that information is, by definition of FASB Statement No. 2:

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

Based on 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:

Net assets are the most often used base for deciding materiality.

________ misstatements are those where the auditor can determine the amount of the misstatement in the account.

The risk of material misstatement is a combination of two client controlled factors: inherent risk and control risk. What is inherent risk, why is it important and give examples of inherent risk factors.

When management has an adequate level of integrity for the auditor to accept the engagement but cannot be regarded as completely honest in all dealings, auditors normally:

Inherent risk is often high for an account such as:

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

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 and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and Substantive Tests of Transactions, and Accounts Payable

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

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 Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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