6. Risk assessment most commonly focuses on two criteria - impact and likelihood. As anorganization's risk assessment process evolves, what other criteria might be valuable toconsider and why?1. They should also consider changes in the process since the last audit because that willhelp them better understand impact and help answer questions about what caused theissue.

Risk assessment, in simple words, is to closely observe and examine the possible vulnerabilities…

Risk assessment most commonly focuses on two criteria - impact and likelihood. As an ganization's risk assessment process evolves, what other criteria might be valuable to nsider and why? 1. They should also consider changes in the process since the last audit because that will help them better understand impact and help answer questions about what caused the

Risk assessment most commonly focuses on two criteria - impact and likelihood. As an ganization's risk assessment process evolves, what other criteria might be valuable to nsider and why? 1. They should also consider changes in the process since the last audit because that will help them better understand impact and help answer questions about what caused the

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter7: Planning The Audit: Identifying, And Responding To The Risk Of Material Misstatement

Section: Chapter Questions

Problem 27MCQ

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Using your knowledge of the relationships among acceptable audit risk, inherent risk, control risk, planned detection risk, performance materiality, and planned evidence, state the effect on planned evidence (increase or decrease) of changing each of the following factors, while the other factors remain unchanged. an increase in acceptable audit risk ________ an increase in inherent risk ________ a decrease in control risk ________ an increase in planned detection risk ________ an increase in performance materiality ________
Which of the following is appropriate about risk assessment? A. The assessed level of inherent and control risk can be sufficiently low, thus resulting to eliminating the need for substantive tests. B. Audit risk may be more effectively determined by assessing inherent and control risk separately. C. Detection risk is eliminated if an auditor were to examine 100 percent off the account balance or class of transactions. D. There is an iverse relationship between detection risk and the combined level of inherent and control risk
The lower the materiality level, the higher the amount of required evidence from substantive procedures to compensate for increased risk. Further audit procedures include risk assessment procedures, test of controls and substantive tests. Group of answer choices False, True True, False True, True False, False
As the acceptable level of detection risk decreases, an auditor may: A. reduce substantive testing by rrelying on the assessment of inherent risk and control risk. B. postpone the planned timing of substantive tests from interim dates to the year-end. C.Eliminate the assessed level of inherent risk from consideration as a planning factor. D. lower the assessed level of control risk
4. This audit tool is very useful in alerting or identifying any deviations from normal expectations set by management based on planning phase. Group of answer choices Check Sheets Control Charts Pareto Charts None of the above Histograms
Which of the following does not increase the need for sufficient appropriate auditevidence?(1) A lower acceptable level of detection risk(2) An increase in the assessed control risk(3) A lower acceptable audit risk(4) A decrease in the assessed inherent risk
Refer to Exhibit 2.5 and answer the following questions. a. (Sections 101, 104, and 105) How does the establishment and operation of the PCAOB help to ensure quality external audits? How will audit firm inspections and investigations by the PCAOB help ensure high audit quality? b. (Sections 201-203) How do Sections 201-203 address audit ()r independence concerns? c. (Section 206) What is a cooling-off period, and how does it address auditor independence concerns? d. (Section 301) How do the audit committee requirements help ensure effective corporate governance? e. (Sections 302 and 906) How do the officer certification requirements help to address the risk of fraud in publicly traded organizations? What is the likelihood that a CFO who is committing fraudulent financial reporting would sign the certification falsely, and what are your reactions to that possibility? f. (Section 401) How does this section relate to the Enron fraud? g. (Section 404) How do the management assessment and audit or attestation of internal controls contained in this section help to address the risk of fraud in publicly traded organizations? h. (Section 407) Why is it important that at least one member of the audit committee be a financial expert? What are the financial reporting implications if the audit committee does not have any individuals serving on it who possess financial expertise? i. (Section 802) How does this section relate to the Enron fraud?
Which of the following is not a benefit claimed for the practice of determining materiality inthe initial planning stage of an audit?a. Being able to fine-tune the audit work for effectiveness and efficiency.b. Avoiding the problem of doing more work than necessary (overauditing).c. Being able to decide early what type of audit opinion to issue.d. Avoiding the problem of doing too little work (underauditing).
What is the benefit of continuous auditing? (Select the BEST answer) a) Faster identification of risk and controls assurance b) Inexpensive to implement c) Skilled resources are readily available
1. Describe how the "culmination" of the audit process looks like. 2. In the final stage of a risk-based audit, how shall the auditor know that sufficient appropriate audit evidence has been obtained to support the conclusions reached for the auditor's report to be issued? 3.What are the major reasons for modifying an otherwise unmodified auditor's report?
2. How do you measure risk in an audit engagement?
20. An assurance engagement of risk management processes by the internal audit activity should start by doing all of the following, except a. Identifying inherent risks and residual risks b. Gaining knowledge of the risk appetite, risk capacity, and risk tolerance c. Understanding the internal and external environment d. Proposing revision of the entity's mission, strategy, and objectives 21. Which of the following is not one of the formal components of COSO ERM Framework? a. Consider how objectives can be achieved by assessing the likelihood and probability of events that may affect the achievement of objectives b. An entity's tone at the top, ethical values, and operating style will help management establish a risk management philosophy and risk appetite c. Management must consider internal and external events that create threats and opportunities d. Risk appetite is defined and communicated as part of the entity's mission statement 24. Review or audit of…