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問題一覧
1
Which of the following statements is not correct about materiality?
An auditor considers materiality for planning purposes in terms of the largest aggregate level of misstatements that could be material to any one of the financial statements.
2
The concept of materiality would be least important to an auditor in determining
the effects of an auditor's direct financial interest in a client
3
Which of the following statements best describes why an auditor makes a preliminary estimate of materiality?
The estimate helps the auditor plan the appropriate evidence to accumulate
4
The risk that an auditor's procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement exist is
Detection risk
5
Which of the following discoveries by the auditor would not raise the red flag of increased inherent risk?
Client makes extensive use of notes receivable and notes payable rather than buying and selling on open-account basis
6
The existence of materiality and audit risk is recognized by the statement in the auditor's standards report that the auditor
obtains reasonable assurance about whether the financial statements are free of material misstatements
7
Which of the following statements regarding materiality is false?
The FRSC has promulgated explicit rules for judging whether an item is material or not.
8
The auditors must consider materiality in planning and audit engagement. Materiality for planning purposes is
The auditor's preliminary estimate of the smallest amount of error that would be material to any one of the client's financial statements
9
The audit risk model consists of: AR = IR x CR x DR. The detection risk is the independent variable. What is the acceptable level of detection risk if the assessed level of inherent risk is High and control risk is Low?
Medium
10
The concept of materiality with respect to audit
Requires the auditor to make judgments as to whether misstatements affect the fairness of the financial statements
11
Which of the following is the reason why preliminary estimate of materiality should be made by the auditor?
There is a direct relationship between the amounts in the financial statements that the auditor consider to be material and the amount of audit work necessary to attest to the fairness of the financial statements
12
When setting a preliminary judgment about materiality.
More evidence is required for a low peso amount than for a high peso amount
13
An auditor assesses control risk because it
affects the level of detection risk the auditor may accept
14
The materiality that is set to reduce to an appropriate level the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole is called
Performance materiality
15
When assessing materiality level for audit purposes, the auditor should consider the Amount involve | Nature of misstatement
Yes | Yes
16
Which of the following is correct concerning performance materiality on an audit?
It will ordinarily be less than financial statement materiality
17
The audit risk model is used primarily
For planning purposes in determining how much evidence to accumulate
18
While performing an audit, Valix, CPA, decides to restrict the risk of material misstatement to 3%. What must the acceptable level of detection risk be if inherent risk is 25% and control risk is 40%?
30%
19
The purpose of assessing control risk is to contribute to the auditor's evaluation of the risk that
Material misstatements may exist in the financial statements
20
When an auditor increases the planned assessed level of control risk because certain control procedures were determined to be ineffective, the auditor would most likely increase the
Extent of tests of details
21
The acceptable level of detection risk is inversely related to the
assurance provided by substantive tests
22
As the materiality level is set at a lower amount, audit risk _____ , while the amount of substantive tests ____
Increases, increases
23
The risk that an auditor will conclude, based on substantive tests, that a material error does not exist in an account balance when, in fact, such error does exist is referred to as
Detection risk
24
Which of the following is a function of the risks of material misstatement and detection risk?
Audit risk
25
Inherent risk and control risk differ from detection risk in that inherent and control risk are
Functions of the client and its environment while detection risk is not
26
Which of the following is not a consideration when the auditor is attempting to assess the inherent risk?
Frequency and intensity of top management's review of the accounting transactions and records
27
As the acceptable level of detection risk decreases, an auditor may change the
Nature of substantive tests from a less effective to a more effective procedure
28
An auditor may compensate for a weakness in the internal control by decreasing the
Level of detection risk
29
On the basis of 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 planned audit risk level, the auditor would
Decrease detection risk
30
Regardless of the assessed level of control risk, an auditor would perform some
Substantive tests to restrict detection risk for significant transaction classes