Stephany Fox
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Audit 441 Chapter 4

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Stephany Fox
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Chapter 4 Audit Quiz

Chapter 4 Audit Quiz

Question 1 of 16

1

risk is the risk that the auditor is exposed to financial loss or damage to his or her professional reputation from litigation, adverse publicity, or other events arising in connection with the audited financial statements.

Drag and drop to complete the text.

    Engagement
    Audit
    Client

Explanation

Question 2 of 16

1

Select from the dropdown list to complete the text.

( Audit, Inherent, Control ) risk is the risk that we miss a misstatement in the financial statements. It focuses on entire financial statements.

Explanation

Question 3 of 16

1

Inherent risk is the likelihood that a material misstatement in the financial statements exists without considering the client's internal controls.

Select one of the following:

  • True
  • False

Explanation

Question 4 of 16

1

Control risk is the risk that the client's internal controls will distract from potential misstatements.

Select one of the following:

  • True
  • False

Explanation

Question 5 of 16

1

"Inherent control risk" and "client risk" are terms that can be used interchangeably. They both refer to the combination of risks that the client can control.

Select one of the following:

  • True
  • False

Explanation

Question 6 of 16

1

Fill the blank space to complete the text.

risk is the risk that the auditor is willing to accept that he or she will fail to detect a material misstatement in the financial statements.

Explanation

Question 7 of 16

1

Select from the dropdown list to complete the text.

The audit risk model can be found with the following formula: AR = ( RMM, CR ) x DR

Explanation

Question 8 of 16

1

Select from the dropdown list to complete the text.

An alternative equation for the audit risk model is: AR = (IR x CR) x ( DR, RMM )

Explanation

Question 9 of 16

1

Increased RMM and decreased DR means you should increase the amount of testing.

Select one of the following:

  • True
  • False

Explanation

Question 10 of 16

1

Increased IR with decreased DR means you should decrease the amount of testing.

Select one of the following:

  • True
  • False

Explanation

Question 11 of 16

1

Increased CR means decreased DR, so the amount of testing will decrease.

Select one of the following:

  • True
  • False

Explanation

Question 12 of 16

1

Increased AR means DR is increased, which means the amount of testing will decrease.

Select one of the following:

  • True
  • False

Explanation

Question 13 of 16

1

If detection risk has gone up, that probably points to which of the following?

Select one of the following:

  • Decreased amounts of testing

  • Increased amounts of testing

Explanation

Question 14 of 16

1

Select from the dropdown list to complete the text.

The three conditions that usually exist when fraud occurs are opportunity, incentive, and ( rationalization, Identification, Discussion ).

Explanation

Question 15 of 16

1

Which of the following is NOT an aspect of SAS 99

Select one of the following:

  • Requires ‘brainstorming’ sessions to discuss how and where the entity’s financial statements might be susceptible to material misstatement due to fraud

  • Describes fraud and its characteristics

  • Requires development of specific measures to decrease detection risk.

Explanation

Question 16 of 16

1

If fraud is suspected, the auditor should obtain additional evidence, consider the impact on the rest of the audit, discuss the problem with management on level above the level where the fraud occurred, suggest that the client consult with legal counsel, and consult legal counsel themselves.

Select one of the following:

  • True
  • False

Explanation

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