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Quiz von Kayla Harbaugh, aktualisiert more than 1 year ago
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Erstellt von Kayla Harbaugh
vor mehr als 3 Jahre
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Frage 1
Frage
Which of the following phrases or terms regarding materiality is used by the Supreme Court of the United States and is not found in FASB Concepts Statement No. 2?
Antworten
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“significantly altered the total mix of information available”
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“in light of surrounding circumstances”
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“amount of a misstatement or omission”
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“probable that the judgement of a reasonable person”
Frage 2
Frage
If $15,000 is considered to be material to the income statement, but $25,000 is material to the balance sheet, the auditor should set overall materiality at which of the following dollar amounts?
Antworten
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$15,000
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$40,000
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$25,000
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$20,000
Frage 3
Frage
If materiality judgments change during the audit opinion formulation process, what happens to previous audit decisions that were based on the evidence obtained using the initial materiality setting?
Antworten
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The auditor repeats all audit procedures performed prior to the change in materiality judgments.
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The auditor modifies the audit opinion to note the change in materiality judgements.
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The auditor reassesses those previous decisions.
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No action is required.
Frage 4
Frage
Which item is correct concerning the risk of material misstatement?
Antworten
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Risk of material misstatement must be assessed in non-quantitative terms.
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Risk of material misstatement arises because audit procedures have been misapplied.
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Risk of material misstatement can be controlled and changed by the auditor.
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Risk of material misstatement is controllable by the client.
Frage 5
Frage
What is the nature of the relationship between risk of material misstatement and audit risk?
Antworten
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None
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Correlational
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Direct
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Inverse
Frage 6
Frage
Detection risk is affected by which aspects of substantive audit procedures?
Antworten
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Nature
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Timing
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Extent
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All of the above
Frage 7
Frage
Which of the following factors would lead an auditor to assess inherent risk at a higher level?
Antworten
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The account balance is easily determined without estimation.
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The account balance is composed of a high volume of nonroutine transactions.
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The account balance is composed of simple transactions.
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All of the above would lead the auditor to assess a higher level of inherent risk.
Frage 8
Frage
To learn more about a company and its inherent risks, auditors can use which of the following resources?
Antworten
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Management inquiries
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Economic statistics
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Online searches
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Any of the above could be used
Frage 9
Frage
Which of the following factors will result in control risk being assessed at a higher level?
Antworten
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There is a lack of supervision of accounting personnel.
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The control environment is operating effectively.
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Accounting staff are well trained and educated.
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Controls are well designed.
Frage 10
Frage
Which of the following are two frequently used planning analytical procedures?
Antworten
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Ratio analysis and trend analysis.
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Reasonableness tests and economic analysis.
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Trend analysis and reasonableness tests.
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Ratio analysis and economic analysis.
Frage 11
Frage
Which of the following best describes year-to-year comparisons of account balances?
Antworten
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Time analyses
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Trend analyses
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Ratio analysis
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Reasonableness tests
Frage 12
Frage
Which of the following ratios provides information about liquidity?
Antworten
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Inventory turnover
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Net profit margin
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Current ratio
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Sales to assets
Frage 13
Frage
What is the main reason to establish guidelines for brainstorming sessions?
Antworten
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To clearly identify lines of authority
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To pass information up to top-level management efficiently
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To encourage interactive and constructive group dialogue and idea exchange
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To comply with SEC requirements
Frage 14
Frage
What type of relationship exists between audit risk and detection risk?
Antworten
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Direct
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Indirect
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No relationship
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Inverse
Frage 15
Frage
What is the typical range for the setting of audit risk?
Antworten
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1%-5%
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1%-10%
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0%-10%
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0%-5%
Frage 16
Frage
Which of the following would be the likely risk results from using a 1% level of detection risk?
Antworten
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High detection risk and high audit risk
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Low detection risk and high audit risk
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High detection risk and low audit risk
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Low detection risk and low audit risk
Frage 17
Frage
Which of the following risks are controllable by the auditor?
Antworten
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Audit risk and detection risk
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Audit risk and control risk
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Risk of material misstatement
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None of the above
Frage 18
Frage
As inherent risk increases, and other risk factors remain constant, what happens to the extent of audit work?
Antworten
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Increases
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Stays the same
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Decreases
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Becomes less reliable
Frage 19
Frage
Which of the following statements best describes what is meant by setting control risk at 100%?
Antworten
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Controls are relevant
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Controls are effective
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Cannot be determined from the information given
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Controls are ineffective
Frage 20
Frage
If the auditor’s assessment of audit risk is low (e.g., 1% rather than 5%), what is the effect on the amount of substantive testing performed by the auditor?
Antworten
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Increase in substantive testing
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No change in substantive testing
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Substantive testing is not needed
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Decrease in substantive testing
Frage 21
Frage
What is the auditor trying to accomplish by varying the timing of audit procedures from the prior year?
Antworten
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Confuse the client
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Gather information during different times of the year
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Introduce unpredictability
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Finish the audit sooner
Frage 22
Frage
What procedure has to be completed at or after the end of the period?
Antworten
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Evaluating of adjusting journal entries
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Assessment of control risk
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Engagement letter
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All procedures must be completed prior to period end
Frage 23
Frage
An increase in the risk of material misstatement would lead to which of the following responses?
Antworten
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Decrease in the extent of audit procedures
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Earlier performance of audit procedures
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Increase in the extent of audit procedures
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No change in the extent or timing of audit procedures
Frage 24
Frage
Which of the following risk factors suggests a heightened level of risk of material misstatement?
Antworten
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Few immaterial related-party transactions
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The departure of key personnel of a company
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Declining a merger with another company
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Having a stable product
Frage 25
Frage
Which of the following terms best describes the risk that audit procedures will fail to detect material misstatements?
Antworten
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Control risk
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Detection risk
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Audit risk
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Inherent risk
Frage 26
Frage
Which of the following statements regarding detection risk is true?
Antworten
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Detection risk incorporates both substantive analytical procedures and tests of details.
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Detection risk provides guidance to the auditor on the substantive audit procedures needed to achieve the desired audit risk.
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A low level of detection risk means the auditor needs to obtain more evidence from substantive procedures.
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All of the above
Frage 27
Frage
In which of the following situations will auditors typically rely on internal controls over financial reporting?
Antworten
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If the client asks the auditor to test controls.
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If the controls are sufficient to increase control risk to an acceptable level.
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If control risk is assessed at a high level.
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If the controls are determined to be designed and operating effectively.
Frage 28
Frage
The risk of material misstatement refers to which of the following?
Antworten
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Control risk and acceptable audit risk
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Inherent risk
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Inherent risk and audit risk
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The combination of inherent risk and control risk
Frage 29
Frage
Which of the following statements is false?
Antworten
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Inherent risk is directly related to the amount of evidence required in account testing.
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Inherent risk is the susceptibility of the financial statements to material misstatement, assuming no internal controls.
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Inherent risk is inversely related to the level of control risk.
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Inherent risk and control risk are assessed by the auditor and controlled by the client.
Frage 30
Frage
Which of the following is a factor that would cause an increase in the assessment of control risk?
Antworten
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The industry is mature and declining
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Little interaction between senior management and operating staff
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A new business strategy is improperly implemented
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New products have uncertain likelihood of success
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