EP AUDITING+ASSURANCE...-MYACCT.LAB
16th Edition
ISBN: 9780134148656
Author: ARENS
Publisher: PEARSON CO
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Question
Chapter 21, Problem 2RQ
To determine
Identify the most important test of perpetual records that include both the unit and cost data before reducing the assessed risk. And also the test that can reduced when it is assumed that the perpetual are determined to be accurate.
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Many auditors assert that certain audit tests can be significantlyreduced for clients with adequate perpetual records that include both unit and cost data.What are the most important tests of the perpetual records that the auditor must makebefore reducing assessed control risk? Assuming the perpetuals are determined to beaccurate, which tests can be reduced?
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
Why is the audit team more concerned with controlling the exposure to the risk of overreliancethan with the risk of underreliance?a. Only the risk of overreliance results in an incorrect audit decision.b. The risk of underreliance is not related to the audit team’s study and evaluation of internalcontrol.c. The risk of overreliance can ultimately result in the audit team’s failing to reduce auditrisk to acceptable levels.d. The risk of underreliance can be controlled by performing tests of controls during theinterim period.
Chapter 21 Solutions
EP AUDITING+ASSURANCE...-MYACCT.LAB
Ch. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQ
Ch. 21 - Prob. 11RQCh. 21 - Each employee of the Gedding Manufacturing Co., a...Ch. 21 - Prob. 13.1MCQCh. 21 - Prob. 13.2MCQCh. 21 - Prob. 13.3MCQCh. 21 - Prob. 14.1MCQCh. 21 - Prob. 14.2MCQCh. 21 - Prob. 14.3MCQCh. 21 - Prob. 15.1MCQCh. 21 - Prob. 15.2MCQCh. 21 - Prob. 15.3MCQCh. 21 - Prob. 16DQPCh. 21 - Prob. 17DQPCh. 21 - Prob. 18DQPCh. 21 - Prob. 19DQPCh. 21 - Prob. 20DQPCh. 21 - Prob. 22DQPCh. 21 - Your client, Ridgewood Heating and Cooling,...Ch. 21 - Prob. 24DQPCh. 21 - Prob. 25DQPCh. 21 - Prob. 26DQPCh. 21 - Prob. 27DQPCh. 21 - Prob. 28DQPCh. 21 - Prob. 29DQP
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- Why are weaknesses (lack of desired control procedures) not tested for compliance? Describe how weaknesses may not be detected during the review phase but discovered during the test of controls audit.arrow_forwardAfter obtaining an understanding of an entitiy's internal control, an auditor may assess control risk at the maximum level for some assertions because he A. performs tests of controls to restrict detection risk to an acceptable level. B. identifies internal control policies and procedures that are likely to prevent material misstatements. C. believes the internal control policies and procedures are unlikely to be effective. D. determines that the pertinent internal control components are not well documented.arrow_forwardYou are the audit manager for a new audit client. Your staff auditors are unsure of what constitutes a control deficiency. Discuss the terms control deficiency, design deficiency, and operating deficiency.arrow_forward
- Give some instances of the dangers to the independence of an external auditor in your explanation.arrow_forwardIn most audits of large entities, control risk assessment contributes to audit efficiency, whichmeans thata. The cost of substantive procedures will exceed the cost of control evaluation work.b. Auditors will be able to reduce the cost of substantive procedures by an amount morethan the control evaluation costs.c. The cost of control evaluation work will exceed the cost of substantive procedures.d. Auditors will be able to reduce the cost of substantive procedures by an amount less thanthe cost of tests of controlsarrow_forwardAre internal controls required even if an auditor doesn't plan to rely on them in his audit? Explain.arrow_forward
- Once the auditor detects a control deficiency, which of the following steps must he or shetake first?a. Perform tests of other controls related to the same assertion as the control deemedineffective.b. Evaluate the severity of the deficiency on the auditor’s control risk assessment for thatassertion.c. Modify the planned substantive procedures as a result of the deficiency.d. Test the deficient control, assuming a maximum level of risk.arrow_forwardIf inherent risk is high and a reasonable level of assurance has been gained from control testing, what type of testing will be performed by the auditor? O extensive procedures focused on estimate errors O some substantive procedures O overall analytical review no more testing, the auditor will rely on the results of the control testsarrow_forward
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