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acc309 materiality and risk

acc309 materiality and risk
89問 • 1年前
  • Tlotlo Legotho
    • 通報

    問題一覧

  • 1

    Which of the following would not increase the risks of material misstatement at the overall financial statement level?

    effective oversight by the board of directors

  • 2

    The auditor's responsibility section in an audit report states that "…the standards require that we plan and perform the audit to obtain ________ assurance about whether the financial statements are free of material misstatement." What type of assurance is given?

    reasonable

  • 3

    ________ risk represents the auditor's assessment of the susceptibility of an assertion to material misstatement, before considering the effectiveness of the client's internal control.

    Inherent

  • 4

    Risk of material misstatement at the assertion level

    determines the nature, timing, and extent of further audit procedures.

  • 5

    The risk of material misstatement exists only at the overall financial statement level.

    FALSE

  • 6

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

    FALSE

  • 7

    Inherent risk and control risk exist independent of the audit of the financial statements.

    TRUE

  • 8

    Risk assessment procedures include inquiries of management and others by the auditor. As part of these procedures, the auditor should talk to

    all of the above.

  • 9

    Risk assessment procedures include

    observation of the entity's operations.

  • 10

    The performance of risk assessment procedures is designed to help the auditor obtain an understanding of the entity.

    TRUE

  • 11

    Auditing standards require the engagement partner to be included in discussions about the susceptibility of the client's financial statements to material misstatements.

    TRUE

  • 12

    Auditors are not allowed to make inquires of employees who are not considered management, such as marketing or sales personnel.

    FALSE

  • 13

    When considering the risk of misstatement due to fraud,

    auditing standards outline procedures the auditor should perform to obtain information from management about their consideration of fraud.

  • 14

    Individuals engaged in conducting a fraud will generally not misrepresent information to the auditor.

    FALSE

  • 15

    The auditor's risk assessment for fraud should be ongoing throughout the audit.

    TRUE

  • 16

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

    significant

  • 17

    Which of the following will generally be considered a significant risk?

    the determination of the amount of bad debt expense

  • 18

    Significant risks often relate to routine transactions.

    FALSE

  • 19

    The auditor must perform substantive tests related to assertions deemed to have significant risks.

    TRUE

  • 20

    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

    decrease detection risk.

  • 21

    When dealing with audit risk,

    the audit risk model helps the auditor to decide how much and what types of evidence to accumulate.

  • 22

    The measurement of the auditor's assessment of the susceptibility of an assertion to material misstatement, before considering the effectiveness of related internal controls is defined as

    inherent risk.

  • 23

    The risk that audit evidence for an audit objective will fail to detect misstatements exceeding performance materiality levels is

    planned detection risk.

  • 24

    If the auditor decides to reduce acceptable audit risk, planned detection risk

    decreases.

  • 25

    Inherent risk is ________ related to planned detection risk and ________ related to the amount of audit evidence.

    inversely; directly

  • 26

    Auditors frequently refer to the terms audit assurance, overall assurance, and level of assurance instead of

    acceptable audit risk.

  • 27

    If planned detection risk is reduced, the amount of evidence the auditor accumulates will

    increase.

  • 28

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

    I only

  • 29

    Inherent risk is often high for an account such as

    inventory.

  • 30

    Inherent risk and control risk

    are inversely related to detection risk.

  • 31

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

    extensively

  • 32

    Auditors typically rely on internal controls of their private company clients

    only if the controls are determined to be effective.

  • 33

    Which is a true statement about audit risk?

    Audit assurance is the complement of acceptable audit risk.

  • 34

    The risk of material misstatement refers to

    the combination of inherent risk and control risk.

  • 35

    When assessing risk, it is important to remember that

    detection risk can only be determined after audit risk, inherent risk, and control risk are determined.

  • 36

    Which of the following is a correct relationship?

    Planned detection risk and inherent risk have an inverse relationship.

  • 37

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

    the susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls

  • 38

    Which of the following statements is not true?

    Inherent risk is inversely related to the amount of audit evidence whereas detection risk is directly related to the amount of audit evidence required.

  • 39

    An auditor who audits a business cycle that has low inherent risk should

    do none of the above.

  • 40

    The most important element of the audit risk model is control risk.

    FALSE

  • 41

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

    TRUE

  • 42

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

    TRUE

  • 43

    A high detection risk equates to a low amount of audit evidence needed.

    FALSE

  • 44

    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.

    FALSE

  • 45

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

    TRUE

  • 46

    Acceptable audit risk and the amount of substantive evidence required are inversely related.

    TRUE

  • 47

    As control risk increases, the amount of substantive evidence the auditor plans to accumulate should increase.

    TRUE

  • 48

    Inherent risk and control risk are directly related.

    FALSE

  • 49

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

    FALSE

  • 50

    If an auditor believes the chance of financial failure is high and there is a corresponding increase in business risk for the auditor, acceptable audit risk would likely

    be reduced.

  • 51

    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

    reduce acceptable audit risk and increase inherent risk.

  • 52

    When the auditor is attempting to determine the extent to which external users rely on a client's financial statements, they may consider several factors except for

    assessment of detection risk.

  • 53

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

    Engagement risk

  • 54

    If an auditor believes the client will have financial difficulties after the audit report is issued, and external users will be relying heavily on the financial statements, the auditor will probably set acceptable audit risk as low.

    TRUE

  • 55

    Overall assessment of acceptable audit risk is highly subjective.

    TRUE

  • 56

    An acceptable audit risk assessment of low indicates a risky client requiring more extensive evidence, assignment of more experienced personnel, and/or a more extensive review of audit files.

    TRUE

  • 57

    Which of the following statements regarding inherent risk is correct?

    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.

  • 58

    Auditors begin their assessments of inherent risk during audit planning. Which of the following would not help in assessing inherent risk during the planning phase?

    obtaining client's agreement on the engagement letter

  • 59

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

    effectiveness of internal controls

  • 60

    Which of the following is an accurate statement regarding inherent risk?

    Auditors are generally conservative in setting inherent risk.

  • 61

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

    TRUE

  • 62

    The auditing profession has established guidelines for setting inherent risk.

    FALSE

  • 63

    Accounts that require considerable judgment have a higher inherent risk.

    TRUE

  • 64

    Which of the following is true regarding audit risk for segments?

    In some cases, a lower acceptable audit risk may be more appropriate for one account than for others.

  • 65

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

    I and II

  • 66

    When using the audit risk model,

    many auditors use broad and subjective measurement terms.

  • 67

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

    FALSE

  • 68

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

    TRUE

  • 69

    Since the audit risk model is a planning model, it assists the auditor in evaluating results.

    FALSE

  • 70

    Performance materiality impacts inherent risk and control risk.

    FALSE

  • 71

    When taken together, the concepts of risk and materiality in auditing

    measure the uncertainty of amounts of a given magnitude.

  • 72

    Which of the following is a correct statement?

    The combination of performance materiality and the audit risk model factors determines planned audit evidence.

  • 73

    Management must recognize that almost any employee is capable of committing a dishonest act under the right circumstances.

    TRUE

  • 74

    Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks. Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

    The subsidiary ledger agrees with the general ledger.

  • 75

    Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks. Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

    The subsidiary ledger agrees with the general ledger.

  • 76

    Which of the following is a correct statement regarding performance materiality?

    Determining performance materiality is necessary because auditors accumulate evidence by segments.

  • 77

    Most practitioners allocate the preliminary judgment about materiality to both the balance sheet and income statement accounts.

    FALSE

  • 78

    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.

    TRUE

  • 79

    Both overstatements and understatements must be considered when allocating materiality to balance sheet accounts.

    TRUE

  • 80

    If an auditor assigns a tolerable misstatement of $1,000 to accounts payable, he or she would need to obtain more audit evidence for that account than if $100,000 had been assigned.

    TRUE

  • 81

    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.

    TRUE

  • 82

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

    required

  • 83

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

    Known

  • 84

    When evaluating the audit findings, the auditor should be satisfied that the

    estimate of the total known and likely misstatements is less than a material amount.

  • 85

    The preliminary judgment on materiality is compared to the total estimated misstatement amount to determine if an account balance is materially misstated.

    TRUE

  • 86

    Total estimated misstatements include known misstatements and projected misstatements plus a sampling error.

    TRUE

  • 87

    If the total misstatement of an account is known, a sampling error still needs to be determined.

    FALSE

  • 88

    Sampling risk results if the sample accurately represents the population.

    FALSE

  • 89

    If the auditor approaches the audit of the accounts in a sequential manner, the findings of the audit of accounts audited earlier can be used to revise the performance materiality established for accounts audited later.

    TRUE

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    問題一覧

  • 1

    Which of the following would not increase the risks of material misstatement at the overall financial statement level?

    effective oversight by the board of directors

  • 2

    The auditor's responsibility section in an audit report states that "…the standards require that we plan and perform the audit to obtain ________ assurance about whether the financial statements are free of material misstatement." What type of assurance is given?

    reasonable

  • 3

    ________ risk represents the auditor's assessment of the susceptibility of an assertion to material misstatement, before considering the effectiveness of the client's internal control.

    Inherent

  • 4

    Risk of material misstatement at the assertion level

    determines the nature, timing, and extent of further audit procedures.

  • 5

    The risk of material misstatement exists only at the overall financial statement level.

    FALSE

  • 6

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

    FALSE

  • 7

    Inherent risk and control risk exist independent of the audit of the financial statements.

    TRUE

  • 8

    Risk assessment procedures include inquiries of management and others by the auditor. As part of these procedures, the auditor should talk to

    all of the above.

  • 9

    Risk assessment procedures include

    observation of the entity's operations.

  • 10

    The performance of risk assessment procedures is designed to help the auditor obtain an understanding of the entity.

    TRUE

  • 11

    Auditing standards require the engagement partner to be included in discussions about the susceptibility of the client's financial statements to material misstatements.

    TRUE

  • 12

    Auditors are not allowed to make inquires of employees who are not considered management, such as marketing or sales personnel.

    FALSE

  • 13

    When considering the risk of misstatement due to fraud,

    auditing standards outline procedures the auditor should perform to obtain information from management about their consideration of fraud.

  • 14

    Individuals engaged in conducting a fraud will generally not misrepresent information to the auditor.

    FALSE

  • 15

    The auditor's risk assessment for fraud should be ongoing throughout the audit.

    TRUE

  • 16

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

    significant

  • 17

    Which of the following will generally be considered a significant risk?

    the determination of the amount of bad debt expense

  • 18

    Significant risks often relate to routine transactions.

    FALSE

  • 19

    The auditor must perform substantive tests related to assertions deemed to have significant risks.

    TRUE

  • 20

    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

    decrease detection risk.

  • 21

    When dealing with audit risk,

    the audit risk model helps the auditor to decide how much and what types of evidence to accumulate.

  • 22

    The measurement of the auditor's assessment of the susceptibility of an assertion to material misstatement, before considering the effectiveness of related internal controls is defined as

    inherent risk.

  • 23

    The risk that audit evidence for an audit objective will fail to detect misstatements exceeding performance materiality levels is

    planned detection risk.

  • 24

    If the auditor decides to reduce acceptable audit risk, planned detection risk

    decreases.

  • 25

    Inherent risk is ________ related to planned detection risk and ________ related to the amount of audit evidence.

    inversely; directly

  • 26

    Auditors frequently refer to the terms audit assurance, overall assurance, and level of assurance instead of

    acceptable audit risk.

  • 27

    If planned detection risk is reduced, the amount of evidence the auditor accumulates will

    increase.

  • 28

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

    I only

  • 29

    Inherent risk is often high for an account such as

    inventory.

  • 30

    Inherent risk and control risk

    are inversely related to detection risk.

  • 31

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

    extensively

  • 32

    Auditors typically rely on internal controls of their private company clients

    only if the controls are determined to be effective.

  • 33

    Which is a true statement about audit risk?

    Audit assurance is the complement of acceptable audit risk.

  • 34

    The risk of material misstatement refers to

    the combination of inherent risk and control risk.

  • 35

    When assessing risk, it is important to remember that

    detection risk can only be determined after audit risk, inherent risk, and control risk are determined.

  • 36

    Which of the following is a correct relationship?

    Planned detection risk and inherent risk have an inverse relationship.

  • 37

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

    the susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls

  • 38

    Which of the following statements is not true?

    Inherent risk is inversely related to the amount of audit evidence whereas detection risk is directly related to the amount of audit evidence required.

  • 39

    An auditor who audits a business cycle that has low inherent risk should

    do none of the above.

  • 40

    The most important element of the audit risk model is control risk.

    FALSE

  • 41

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

    TRUE

  • 42

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

    TRUE

  • 43

    A high detection risk equates to a low amount of audit evidence needed.

    FALSE

  • 44

    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.

    FALSE

  • 45

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

    TRUE

  • 46

    Acceptable audit risk and the amount of substantive evidence required are inversely related.

    TRUE

  • 47

    As control risk increases, the amount of substantive evidence the auditor plans to accumulate should increase.

    TRUE

  • 48

    Inherent risk and control risk are directly related.

    FALSE

  • 49

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

    FALSE

  • 50

    If an auditor believes the chance of financial failure is high and there is a corresponding increase in business risk for the auditor, acceptable audit risk would likely

    be reduced.

  • 51

    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

    reduce acceptable audit risk and increase inherent risk.

  • 52

    When the auditor is attempting to determine the extent to which external users rely on a client's financial statements, they may consider several factors except for

    assessment of detection risk.

  • 53

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

    Engagement risk

  • 54

    If an auditor believes the client will have financial difficulties after the audit report is issued, and external users will be relying heavily on the financial statements, the auditor will probably set acceptable audit risk as low.

    TRUE

  • 55

    Overall assessment of acceptable audit risk is highly subjective.

    TRUE

  • 56

    An acceptable audit risk assessment of low indicates a risky client requiring more extensive evidence, assignment of more experienced personnel, and/or a more extensive review of audit files.

    TRUE

  • 57

    Which of the following statements regarding inherent risk is correct?

    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.

  • 58

    Auditors begin their assessments of inherent risk during audit planning. Which of the following would not help in assessing inherent risk during the planning phase?

    obtaining client's agreement on the engagement letter

  • 59

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

    effectiveness of internal controls

  • 60

    Which of the following is an accurate statement regarding inherent risk?

    Auditors are generally conservative in setting inherent risk.

  • 61

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

    TRUE

  • 62

    The auditing profession has established guidelines for setting inherent risk.

    FALSE

  • 63

    Accounts that require considerable judgment have a higher inherent risk.

    TRUE

  • 64

    Which of the following is true regarding audit risk for segments?

    In some cases, a lower acceptable audit risk may be more appropriate for one account than for others.

  • 65

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

    I and II

  • 66

    When using the audit risk model,

    many auditors use broad and subjective measurement terms.

  • 67

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

    FALSE

  • 68

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

    TRUE

  • 69

    Since the audit risk model is a planning model, it assists the auditor in evaluating results.

    FALSE

  • 70

    Performance materiality impacts inherent risk and control risk.

    FALSE

  • 71

    When taken together, the concepts of risk and materiality in auditing

    measure the uncertainty of amounts of a given magnitude.

  • 72

    Which of the following is a correct statement?

    The combination of performance materiality and the audit risk model factors determines planned audit evidence.

  • 73

    Management must recognize that almost any employee is capable of committing a dishonest act under the right circumstances.

    TRUE

  • 74

    Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks. Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

    The subsidiary ledger agrees with the general ledger.

  • 75

    Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks. Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

    The subsidiary ledger agrees with the general ledger.

  • 76

    Which of the following is a correct statement regarding performance materiality?

    Determining performance materiality is necessary because auditors accumulate evidence by segments.

  • 77

    Most practitioners allocate the preliminary judgment about materiality to both the balance sheet and income statement accounts.

    FALSE

  • 78

    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.

    TRUE

  • 79

    Both overstatements and understatements must be considered when allocating materiality to balance sheet accounts.

    TRUE

  • 80

    If an auditor assigns a tolerable misstatement of $1,000 to accounts payable, he or she would need to obtain more audit evidence for that account than if $100,000 had been assigned.

    TRUE

  • 81

    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.

    TRUE

  • 82

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

    required

  • 83

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

    Known

  • 84

    When evaluating the audit findings, the auditor should be satisfied that the

    estimate of the total known and likely misstatements is less than a material amount.

  • 85

    The preliminary judgment on materiality is compared to the total estimated misstatement amount to determine if an account balance is materially misstated.

    TRUE

  • 86

    Total estimated misstatements include known misstatements and projected misstatements plus a sampling error.

    TRUE

  • 87

    If the total misstatement of an account is known, a sampling error still needs to be determined.

    FALSE

  • 88

    Sampling risk results if the sample accurately represents the population.

    FALSE

  • 89

    If the auditor approaches the audit of the accounts in a sequential manner, the findings of the audit of accounts audited earlier can be used to revise the performance materiality established for accounts audited later.

    TRUE