If an auditor believes the chance of financial failure is low and there is a corresponding increase in business risk for the auditor, acceptable audit risk would likely Select one: a. be reduced. b. be calculated using a computerized statistical package. O c. be increased. d. remain the same.
Q: Please decide control risk, inherent risk and planned audit evidence will be affected (increase or…
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A: Information risk is the risk that the information disseminated by a company will be materially tend…
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A: The auditor should seriously consider the profitability of the engagement , when he decides whether…
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Q: Auditors make materiality judgments during the planning phase of the audit in order to be sure they…
A: 1.
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A: An Auditor understanding of its environment, it's entity and then assessing the risk of material in…
Q: Which of the following increase control risk?
A: The answer for the multiple choice question and relevant explanation are presented hereunder : What…
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A: Test of controls are performed to determine the effectiveness of the control to detect and correct…
Q: (A) The requirement is to find the best statement concerning an auditor’s assessment of…
A: Control risk alludes to the probability that a large misrepresentation originating from a caused by…
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Q: An auditor has completed the risk assessment process for the firm and is evaluating the results. If…
A:
Q: Matters that could affect the necessary extent of testing for a control activity as it related to…
A: Auditor: An auditor is a person who is accountable for preparing and examining financial records.…
Q: In which of the following circumstances would an auditor expect to find that an entity had…
A: Definition: Audit: Audit is the process of verification of the compliance of the financial…
Q: If the potential client operates in a risky industry, the management lacks integrity, and have a…
A: Inherent risk In simple term inherent risk means that there is chance of omission or errors while…
Q: As the acceptable level of detection risk decreases, an auditor may: A. reduce substantive testing…
A: The requirement is to determine a likely auditor reaction to a decreased acceptable level of…
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A:
Q: TRUE OR FALSE When sampling is used by an auditor, an element of uncertainty is present in the…
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A:
Q: Explain how ratio analysis and industry comparisons can be useful to the auditor identifying…
A: Ratio Analysis is a tool by which an auditor can examine the data for the two financial years and…
Q: Which sentence below is true about audit risk: A. Audit risk is the risk that a company may hire…
A: Auditing means the independent checking of company operation by outsider. Auditor is qualified and…
Q: Which of the following is an incorrect statement? a. The amount of audit work should vary…
A: The person that analyzes the books of the company is known as the auditor. The auditor checks all…
Q: To allocate the preliminary estimate of materiality to the accounts, the auditor might consider A.…
A: in order to plan the nature timining and extent of the audit procedure that is needed to perform the…
Q: Which of the following risk types increase when an auditor performs substantive analytical audit…
A: Analytical Audit Procedures: Analytical procedure is a method by which standard balances are…
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Q: Which of the following statements is correct concerning analytical procedures used in planning an…
A: Analytical procedures: Analytical procedures are the examination of the financial statements. The…
Q: The competence (reliability) of audit evidence cannot be improved by testing a larger sample of…
A: Audit Evidence: Audit evidence are the supportive documents of the transaction on the basis of these…
Q: On the basis of audit evidence gathered and evaluated, an auditor decides to decrease the level of…
A: Answer: Option D. Decrease in the assessed control risk.
Q: When an audior increases the assessed level of control risk because certain control activities were…
A: Answer: Option C.
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A:
Q: When gathering data, an audit team identified both subjective and objective criteria for measuring…
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Q: On the basis of audit evidence gathered and evaluated, an auditor decides to increaseassessed…
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Q: The audit risk model includes the four risks listed below. Match the type of risk with the related…
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Q: determine whether statement 1 and 2 are true or false 2. S1- Studying the relationship of financial…
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Q: Which of the following is consistent with an assessed level of control risk at below the maximum…
A: solution concept control risk at below the maximum level The control risk at below the…
Q: Based on evidence gathered and evaluated, an auditor decides to increase the assessedlevel of…
A: Definition: Planned detection risk is the risk in audit evidence for a segment that will fail to…
Q: The tolerable rate of deviation set by the auditor for tests of controls depends primarily on which…
A: The auditor should determine the maximum rate of deviations from the prescribed control that he…
Q: Read the case. Then answer the questions based on it. BACKGROUND: Audit standards indicate that…
A: Answer:- 2 Auditors should mitigate the risk associated with both very large and very small…
Q: Why is the audit team more concerned with controlling the exposure to the risk of overreliancethan…
A: Issuance of an unqualified record of financial statements due to the auditor's inability to correct…
Q: DETERMINE WHETHER TRUE OR FALSE S1- Toward the end of an engagement, after all audit evidence has…
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Q: (1) indicate whether you believe the scenario reflects negatively on management integrity, and…
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- Q10 Which of the following best describes the reason why independent auditors report on financial statements? a. management fraud may exist and it is more likely to be detected by independent auditors. b. Different interests may exist between the company preparing the statements and the persons using the statements. c. A misstatement of account balances may exist and is generally corrected as the result of the independent auditors' work. d. Poorly designed internal control may be in existence.LO 8 A review of business failures as described in the financial press, such as the Wall Street Journal, suggests that the control environment is one of the major contributors to the failure. Often the tone at the top at the failed companies reflects a disdain for controls and an emphasis on accomplishing specific financial reporting objectives such as reporting increased profitability. How will the auditor’s assessment of the operating effectiveness of the control environment affect the design and conduct of an audit? Consider both a positive and negative assessment.{Auditing} 30. During the course of gathering audit evidence, an auditor obtains them from both internal and external sources. What will be the reliability status of the evidence obtained from these two sources? a. Both internal and external sources are less reliable b. Evidence obtained from internal sources is more reliable than external sources c. Both internal and external sources are more reliable d. Evidence obtained from external sources is more reliable than internal sources
- tch the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.33. Evidence is generally considered appropriate when a. it has been obtained by random selection b. there is enough of it to afford a reasonable basis for an opinion opn financial statements c. it has the qualities of being relevant, objective, and free from known bias d. it consists of written statements made by managers of the enterprise under audit.Question 45 As the acceptable level of detection risk decreases, an auditor may change the Group of answer choices Timing of substantive tests by performing them at an interim date rather than at year end. Nature of substantive tests from a less effective to a more effective procedure. Timing of tests of controls by performing them at several dates rather than at one time. Assessed level of inherent risk to a higher amount.
- S1: The concept of reasonable assurance recognizes that the cost of internal control should not exceed the benefits expected to be derived. S2: Absolute assurance is probably not possible because of the limitations in internal control such as human factor and projection risk. S3: An overly aggressive management that gives too much emphasis on meeting or even exceeding operating goals may be willing to enter into high-risk dealings or activities with the expectation of high returns. A. all statements are true B. all statements are false C. S1 and S2 are true D. S1 and S3 are trueQuestion 7 Z scores are: A. Used to evaluate the quality of imaged files B. Used to identify outliers in data C. A fraud score based on ISO standards D. Issued by the SEC to identify public companies that are experiencing risk assurance problem ReplyForward{Auditing} 37. Based on professional judgment an auditor establishes that if the amount of error or omission is within 1% of total revenue it is not considered as misstatement. Assume, the amount of service revenue is overstated by OMR 5,000 which is 5% of total revenue. Does it amount to material misstatement? a. No, as the percentage of misstated amount is less than 1% of total revenue b. Unable to decide as the data is inadequate c. None of the options d. Yes, as the percentage of materially misstated amount is more than 1% of total revenue
- TRUE OR FALSE1. WHEN OBTAINING AN UNDERSTANDING OF CONTROL ACTIVITIES OF A RELATIVELY SMALL CLIENT, THE AUDITOR IDENTIFIED NO CONTROL ACTIVITIES, THE AUDITOR WOULD PROBABLY SET A HIGH ASSESSMENT OF CONTROL RISK2. WHEN A COMPANY DESIGNS AND IMPLEMENTS INTERNAL CONTROLS, COST OF THE CONTROLS IS NOT A VALID CONSIDERATION.3. AUDITING STANDARDS PROHIBIT RELIANCE ON THE WORK OF INTERNAL AUDITORS DUE TO THE LACK OF INDEPENDENCE OF THE INTERNAL AUDITORS1: Additional compliance tests is necessary when an auditor may desire a further reduction in the assessed level of control risk in order to reduce even further the extent of substantive tests to be applied to year-end account balances.$2: Regardless of how low the assessed level of control risk, the acceptable level of detection risk could never be so low as to preclude the need for any substantive tests at all.$3: Material weaknesses are those reportable conditions for which there is more than a relatively moderate risk that the deficiency may result in misstatements that are material to the financial statements. A: Ifall statements are correct. B-If only one statement is correct. C-If only two statements are correct. D- If all statements are incorrect.12. When the auditor based on his understanding of internal control of the client concludes that the controls are ineffective or that evaluation of their effectiveness would be inefficient, then the auditor may assess control risk at the _____________ level for some or all financial statement assertions. Group of answer choices COMPLETE MAXIMUM MODERATE MEDIUM